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THE  ECONOMICS  OF  SOCIALISM 


THE    ECONOMICS 
OF   SOCIALISM 


By  H.   M.   HYNDMAN 

Author  of 
^Evolution  oj  Revolution,^'  etc. 


BOSTON 

SMALL,  MAYNARD  &  COMPANY 

rUBLISHERS 


Copyright,  1921 

BY  SMALL,  MAYNARD  &  COMPANY 

(Incorporated) 


?\  *•  •  *.  •  i  •  '• 


H3 


CONTENTS 


PAGE 

vii 


Preface 

Chapter         I.  Methods  of  Production.       .       .  1 

Chapter      II.     Value ,38 

Chapter     III.     Surplus  Value /71   / 

Chapter      IV.  Circulation  of  Commodities         .  108 

Chapter        V.    Profit 142 

Chapter      VI.    Rent 159 

Chapter    VII.     Interest 189 

Chapter  VIII.    Wages 200 

Chapter      IX.  Industrial  Crises    ....  210 

Chapter       X.  Objections  to  the  Labor  Theory 

of  Value 244 

Chapter     XI.  The  Final  Futility  of  Final  Utility  258 

Chapter    XII.  Synthesis  of  Analysis    .       .       .  278 


.    9     B 


PREFACE 

There  seem  to  be  many  students  of  political  economy 
who  do  not  devote  either  the  time  or  the  attention  which 
are  required  for  the  complete  mastery  of  Marx's  great 
works.  They  are,  consequently,  almost  as  inaccessible 
to  the  majority  of  EngUsh  readers  to-day  as  they  were  in 
the  original  German.  The  subject  is  hard.  Marx's 
style  and  method  of  exposition  are  by  no  means  easy, 
and,  if  I  am  to  judge  by  the  ridiculous  misrepresenta- 
tions of  his  theories  which  still  pass  current  at  our  ancient 
seats  of  learning,  his  thoughts  themselves  are  difficult  of 
comprehension. 

Karl  Marx  has  now  been  dead  nearly  forty  years.  It  is 
safe  to  say  that  never  has  his  influence  been  greater  than 
it  is  now.  Nothing,  indeed,  is  more  remarkable  than  the 
hopeless  failm-e  of  his  critics  to  substitute  any  scientific, 
or  even  reasonable,  explanation  of  the  capitaHst  system  of 
production  for  the  masterly  analysis  contained  in  his 
"Capital." 

We  are  continually  told,  it  is  true,  that  "Marx  is  out 
of  date";  that  "his  whole  system  is  a  muddle  of  contradic- 
tions"; that  "if  he  were  Hving  to-day  he  would  have  to  go 
to  school  again  in  political  economy,"  and  so  forth  and 
so  on.  Strange  to  say,  however,  whenever  these  con- 
temptuous sciohsts  are  brought  to  the  test,  and  they  are 
called  upon  to  maintain  their  position,  even  anonymously, 
they  at  once  take  refuge  in  discreet  silence.  In  the  same 
way,  Messrs.  Marshall,  Foxwell,  Sidney  Webb,  Wicksteed, 


viii  PREFACE 

Bernard  Shaw  and  the  whole  bourgeois  school  of  Jevo- 
nians  and  Fabians,  who  claimed  and  claim  to  solve 
all  problems  of  political  economy  on  the  theory  of  final 
utiHty,  when  my  paper  on  "The  Final  Futility  of  Final 
Utility,"  reprinted  as  Chapter  XI,  was  sent  round  to 
them  as  a  challenge,  declined  to  discuss  Marx's  theories 
at  all,  even  in  a  PoUtical  Economy  Club!  This  though 
two  or  three  of  them  had  declared  beforehand  that  Marx 
and  his  presumptuous  expositor  would  both  be  crushed 
with  ease. 

It  has  been  the  same  ever  since,  with  aU  sorts  and  con- 
ditions of  English  academic  "Professors."  And  endowed 
Schools  of  PoUtical  Economy,  teachers  and  students  ahke, 
are  to-day  equally  disinclined  to  debate  publicly,  in  the 
press  or  on  the  platform,  the  soundness  or  rottenness  of 
Marx's  theories;  though  they  continue  theu-  campaign  of 
detraction  whenever  they  can  safely  do  so — unopposed. 

Marx,  in  short,  still  holds  the  field.  Nearly  aU  the 
original  work  of  historic  economy  done  during  the  past 
fifty  years  has  been  based  upon  his  analysis  and  gener- 
alisations; while  the  course  of  economic  and  social  events 
has,  in  the  main,  followed  the  fines  of  his  forecasts. 

But  Marx,  fike  other  great  thinkers,  has  suffered  not 
only  from  ignorant  and  prejudiced  attacks,  but  from  the 
tendency  of  some  of  his  bigoted  worshippers  to  erect  him 
into  a  sort  of  infalHble  Sociafist  Pope,  and  universal  ar- 
biter of  economic  and  social  destiny.  Forgetting,  what 
he  himself  never  forgot,  that,  of  necessity,  he  built  upon 
the  work  of  others,  who  had  preceded  him,  and  here  and 
there  had  anticipated  him — as  j6Jm-JB€llef»4n  the  antag- 
onism between  money  and  conmiodities;JBiibeKLQwei]Las 
to  the  indispensable  necessity  of  waste  under  the  capital- 


PREFACE  ix 

ist  system;  Eourier  (1825)  as  to  industrial  monopoly 
being  in  the  long  run  under  capitalism  the  logical  and 
inevitable  outcome  of  industrial  competition  ;  and  the 
Chartists  as  to  wage-slavery  being  only  chattel-slavery 
in  disguise.  Forgetting  all  this,  certain  fanatics,  far 
more  Marxist  than  Marx  ever  was,  have  claimed  for  him 
the  position  at  one  period  claimed  for,  and  accorded  to, 
Aristotle.  They  have  also  carried  their  fetish-worship 
from  the  domain  of  thought  into  that  of  wholly  uncritical 
propaganda,  and  have  cited  "texts"  from  Marx's  earher 
writings  and  pamphlets  and  letters,  as  Christians  quote 
authoritatively  from  the  Gospels  and  the  Epistles  of  St. 
Paul,  about  the  practical  affairs  of  every-day  poHtical  and 
social  life. 

Now  it  is  safe  to  say  that,  on  matters  of  this  kind,  as 
he  showed  even  in  respect  to  what  was  advisable  in  his 
own  country,  Marx  was  not  a  good  judge  when  he  was 
living.  Nothing,  therefore,  could  possibly  be  more  fool- 
ish than  to  cite  his  opinions  as  decisive  on  such  questions 
when  thirty-eight  years  of  rapid  and  critical  development 
have  passed  away  since  his  death.  It  is  surely  enough 
that  he  has  given  us,  at  the  expense  of  a  Hfe-time  of  re- 
search and  exposition,  the  key  whereby  we  may  solve 
many  of  the  economic  and  social  problems  of  the  past, 
may  comprehend  the  economic  and  social  antagonisms  of 
the  present,  and  may  go  forward,  consciously  and  capably, 
to  the  harmonisation  of  the  great  material  difficulties  and 
class  struggles  which  confront  us  to-day. 

It  is  Marx's  explanation  of  Mehrwerth,  or  Surplus 
Valii£,_aa_tbfi_ .basis  of  modern  competitive  production  for 
profit,_iQllQwed  by  his  able  and  illuminating  differentia- 
tion of  the  categories  of  capital,  and  the  source  of  the 


X  PREFACE 

average  rate  of  profit,  which  have  developed  political 
economy  from  an  art  into  a  science.  His  Theory  of  His- 
toric Determinism,  or  the  Material  Basis  of  History,  has 
been  pushed  very  much  farther,  to  the  exclusion  of  all 
other  considerations,  than,  certainly,  would  have  been 
approved  by  Marx  himself.  But,  taken  with  such  modi- 
fications as  he  would  probably  have  accepted,  the  theory 
throws  much  light  upon  the  growth  of  human  society  in 
some  of  its  aspects;  although  Lewis  Morgan's  plan  of 
stripping  off  each  successive  layer  of  inventions  and  dis- 
coveries, through  the  long  ages  of  human  development, 
and  examining  the  social  forms  beneath,  lends  itself  less 
to  general  misapprehension. 

Lately,  however,  we  have  had  a  most  extraordinary 
example  of  the  danger  of  endeavouring  to  force  pseudo- 
Marxism  upon  a  huge  aggregation  of  peoples  by  a  ruthless 
despotism  imposed  from  above.  Bolshevism  is  a  com- 
bination of  personal  ambition  and  fanatical  materialism, 
applied  under  conditions  which  rendered  any  reahsation 
of  scientific  Socialism  absolutely  impossible.  Failure 
was  certain.  When  the  leaders  of  this  futile  attempt 
tried  to  anticipate  the  evolution  of  economic  and  social 
forms  by  generations,  through  a  kind  of  Collectivist  Czar- 
ism,  they  have  been  compelled  to  return  to  the  much 
lower  stage  of  industrialism  to  which  Russia  had  attained, 
and  to  bow  the  knee,  by  capitahst  concessions  to  for- 
eigners and  capitahst  reorganisation  at  home,  before  that 
very  capitahst  system  which  they  desired  to  reorganise 
into  SociaHsm,  before  its  development  had  fully  begun. 

This  is  precisely  the  irrational  impatience  and  individ- 
ual arrogance  that  Marx  and  his  coadjutor  Engels  would 
have  denounced  now,  and  as  a  matter  of  fact  did  denounce, 


PREFACE  xi 

as  impossible  and  anarchical,  in  their  own  time.  The 
scientific  Marxists  of  Russia,  headed  by  George  Plech- 
anoff  and  Paul  Axelrod,  foresaw  and  predicted  what  has 
since  occurred,  and  all  the  best-accredited  exponents  of 
Marxist  theories  in  Western  Europe  agreed  with  them. 
Bolshevism  is,  in  fact,  a  hideous  travesty  of  Marxism  and 
runs  directly  counter  to  the  entire  teachings  of  scientific 
pohtical  economy  and  social  evolution. 

It  is  true  that,  in  the  last  paragraphs  of  the  Commu- 
nist IManifesto,  published  in  1847-48,  ground  is  given  for 
the  contention  that,  at  that  period,  its  authors,  Marx  and 
Engels,  thought  that  great  countries,  far  behind  the  most 
advanced  nations  in  economic  status,  might  anticipate 
evolution  by  force.  But  that  I  can  aflBrm  most  positively 
was  in  direct  antagonism  to  their  opinions  at  a  later  period. 
Marx,  in  conversation  with  myself,  stated  clearly  that,  in 
his  judgment,  a  nation  could  only  attain  to  the  level  of 
economic  and  social  development  for  wliich  it  had  been 
prepared  by  its  internal  social  evolution.  Engels  put  the 
point  still  more  strongly  to  my  friend  BeKort  Bax.  And 
both  of  them,  singly  and  together,  wrote  to  the  same 
effect  as  they  spoke.  To  confuse  autocratic  Bolshevism, 
therefore,  with  Marxism,  or  with  its  pohtical,  social  and 
co-operative  expression  in  Social-Democracy,  is  only  a 
device  of  the  ignorant  or  mahgnant. 

It  is  natural,  however,  that  pohtical  economists  who 
uphold  either  the  bourgeoisie  or  its  bureaucracy,  in  any 
shape,  should  be  as  bitterly  hostile  to  ]\Iarx,  who  gave  a 
reasoned  and  scientific  basis  to  economic  studies,  as  their 
predecessors  were  to  the  ablest  of  the  Chartists,  who  put 
the  economic  antagonism  between  Labour  and  Capital, 
between   wage-slaves   and   employers,    between   human 


xii  PREFACE 

agents  and  the  machinery  which  overmastered  them,  in 
popular  form.  Both  pointed  to  Capital  as  the  social 
enemy  of  the  toilers:  Marx  proved  why  it  must  inevi- 
tably continue  to  be  so.  His  social  labour  theory  of 
value  indicates  for  the  capitaUst  class  its  absorption  into 
the  entire  democratic  co-operative  community,  as  the 
next  stage  in  the  upward  and  onward  progress  of  the  race. 
It  is  not  so  much  the  social  labom*  value  theory  itself, 
as  the  necessary  sociological  deductions  from  it,  that 
rouse  the  animosity  of  the  capitahst  "captains  of  indus- 
try," their  professors,  and  their  various  dependents  and 
hangers-on. 

Hence  the  great  efforts  made  to  show  that  Marx  was 
at  one  and  the  same  time  a  man  of  transcendent  ability — 
so  much  cannot  be  denied — and  a  muddle-headed  thinker, 
who  actually  took  great  pains  to  contradict  in  his  third 
volume  of  the  "Capital"  (produced  and  edited  by  Engels 
after  Marx's  death)  all  his  contentions  in  the  first  volume, 
and  even  to  attribute  to  him  the  inconceivable  fatuity  of 
admitting  that  he  did  so.  I  have  dealt  with  this  curious 
contradictory  estimate  of  Marx's  capacity  in  Chapter  X. 
It  is  difficult,  however,  to  exaggerate  the  nonsense,  soberly 
and  seriously  penned,  by  economists  of  reputed  abihty 
and  standing,  in  order  to  belittle  the  intelhgence  of  the 
author  whose  arguments  they  are  wholly  unable  to  refute. 
Thus,  not  long  ago,  an  elaborate  pamphlet,  stated  to  be 
written  by  one  of  the  leading  English  Professors  of  Polit- 
ical Economy,  to  which  Sir  Arthur  Steel  Maitland,  M.P., 
contributed  a  Preface,  was  lent  to  me  by  Belfort  Bax  for 
comment.  It  contained  the  usual  Final  FutiHty  con- 
tentions, in  all  their  barrenness,  and  the  whole  thing  was 
scarcely  worth  glancing  at,  except  as  a  further  proof  of 


PREFACE  xiii 

the  longevity  of  error,  where  ignorance  and  prejudice 
seem  to  suit  the  taste  of  a  dominant  class.  But  one  crit- 
icism was  so  contemptible  that  I  reproduce  its  purport, 
in  order  to  show  the  lengths  to  which  the  exquisite  ran- 
cour of  the  professorial  mind  will  lead  a  writer  who,  I 
daresay,  in  other  matters,  is  quite  a  decent  man. 

This  learned  gentleman  actually  gave  it  as  his  con- 
sidered opinion  that,  because  Karl  Marx  was  poor  through- 
out his  Kfe,  and  was  at  times  much  troubled  by  money 
worries,  therefore  he  was  unable  to  think  clearly  on  the 
subjects  with  which  he  undertook  to  deal.  At  this  rate, 
Spinoza  was  a  fourth-rate  philosopher,  William  Blake  a 
poet  and  artist  of  no  account,  and  Cort,  the  originator  of 
the  hot  blast,  an  inventor  of  inferior  capacity.  A  case 
must  indeed  be  in  a  bad  way  when  one  of  its  leading  ad- 
vocates resorts  to  seK-degrading  imputations  of  this  sort. 

The  main  reasons  why  a  few  of  Marx's  honest  and  un- 
prejudiced critics  have  not  grasped  his  full  meaning  are 
that  they  have  not  covered  the  whole  area  of  his  system- 
atic investigation  of  value;  that  they  have  not  followed  up 
the  distinction  between  constant  capital  and  variable 
capital  to  its  ultimate  issue;  that  they  have  not  worked 
out  his  explanation  of  average  rate  of  profit,  as  securing 
the  distribution  among  freely  competing  capitals  of  vary- 
ing amounts  of  surplus  value;  that  they  confuse  cost  of 
production  with  price  of  production;  and  that  they  forget 
that,  in  applying  abstract  theories  to  the  solution  of 
practical  problems,  allowances  have  always  to  be  made 
for  friction,  changing  conditions,  and  the  like. 

Frequently,  also,  there  is  a  determinate  inclination  to 
regard  the  question  of  the  apportionment  of  gross  and 
net  profit,  due  to  the  unpaid  labour  of  the  wage-earners 


xiv  PREFACE 

at  large,  among  all  the  various  capitals  engaged  in  social 
production  and  distribution  of  commodities,  from  the 
point  of  view  of  the  individual  capitalist  and  the  personal 
(or  company)  appropriation  of  the  surplus  value,  or  gross 
profit,  produced  by  such  unpaid  labour  of  his  own  wage- 
earners.  Consequently,  these  writers  fail  to  comprehend 
how  it  comes  about  that  capitals  with  greater  amounts 
of  constant  value  in  their  composition  obtain  for  their 
commodities  when  produced  and  reaUsed,  in  money  or 
its  equivalent,  prices  higher  than  their  value,  and  capitals 
with  less  constant  capital  in  their  composition  obtain  for 
their  commodities  under  the  same  conditions  prices 
lower  than  their  value. 

But,  after  all,  the  best  evidence  that  Marx  was  not 
both  a  genius  and  a  noodle  lies  in  the  indisputable  fact 
that  his  theories  have  Hved  down  the  criticism  of  bour- 
geois economists.  When  a  Professor  of  PoUtical  Econ- 
omy of  the  highest  reputation.  Prof.  A.  A.  Issaieff  of  the 
University  of  St.  Petersburg,  gave  up  his  Chair  rather 
than  go  on  teaching  what  was  antagonistic  to  IMarx's 
theories;  when,  practically,  the  whole  International  So- 
cialist Party  accepts  his  views  and  acts  upon  his  eco- 
nomic principles;  when  we  bear  in  mind  that  all  this  recog- 
nition is  due  to  no  sentimental  attraction,  still  less  to  any 
sort  of  rehgious  enthusiasm,  but  is  wholly  and  solely  de- 
pendent upon  the  force  of  pure  reason — I  think  nothing 
more  need  be  said  as  to  Marx's  influence  being  a  living 
power  in  world-wide  sociology. 

In  the  present  volume  I  make  a  further  endeavour  to 
simplify,  for  ordinary  readers,  the  main  points  of  Marx's 
teaching,  which  I  have  been  propagating  myself,  in  Great 
Britain,  for  the  past  forty  yeai's.    My  personal  acquain- 


PREFACE  XV 

tance  with  Marx — broken  off  by  some  amusing  if  viru- 
lent attacks  upon  me,  by  himself  and  Engels,  in  the  well- 
known  "Letters  to  Sorge,"  and  then  happily  renewed — 
enabled  me  to  have  the  advantage  of  direct  explanation 
by  him  of  some  of  the  more  difficult  passages  in  the 
"Capital."  Few  are  now  Hving  who  enjoyed  a  similar 
privilege. 

The  book  is  founded  upon  a  series  of  Lectures,  delivered 
so  long  ago  as  1894,  to  the  members  and  friends  of  the 
Social-Democratic  Federation,  and  afterwards  printed 
and  circulated.  They  have  long  been  out  of  print.  The 
whole  has  now  been  carefully  revised,  largely  rewritten 
and  considerably  expanded. 

Throughout  I  have  not  confined  myseK  to  a  bold  ex- 
position of  Marx's  views.  Wherever  it  has  seemed  to 
me  desirable,  for  the  better  understanding  of  the  subject, 
I  have  made  use  of  quotations  and  elucidations  from  other 
writers  upon  political  economy.  I  have,  also,  shown  how 
the  great  war  has  hastened  forward  powerful  combinations 
of  the  capitahsts,  on  the  one  side,  and  of  the  wage-earners, 
on  the  other,  with  a  rapidity  not  expected  in  Marx's  day. 
The  class  struggle  has  thus  been  intensified  throughout 
the  world,  in  the  pohtical  as  well  as  in  the  industrial 
field.  Direct  action,  in  the  shape  of  mass  strikes  and  gen- 
eral strikes,  has  been  vigorously  advocated  and  adopted 
in  more  than  one  country;  while  in  Italy  seizm'e  of  large 
works  by  the  wage-earners  was,  though  unsuccessful, 
clear  evidence  of  revolt  against  the  entire  wage  system 
and  production  for  profit.  In  order  to  meet  this  growing 
unrest,  peacefully  and  politically,  a  thorough  compre- 
hension of  the  general  economic  and  social  development 
is  indispensable. 


xvi  PREFACE 

Some  repetitions  of  the  basic  truths  of  the  social- 
labour  theory  of  value,  as  well  as  of  the  important  cate- 
gories of  capital,  as  defined  by  Marx,  will  be  found  in  the 
following  pages.  I  have  considered  this  advisable,  re- 
gard being  had  to  the  strange  misapprehensions  which 
are  current  as  to  the  real  purport  of  Marx's  contentions 
and  their  bearing  upon  the  economic  and  social  problems 
of  our  day. 

I  hope,  therefore,  in  the  critical  period,  social  and 
political,  upon  which  we  have  obviously  entered,  the 
volume  wiU  be  of  service  to  students  of  political  economy 
and  especially  to  members  of  the  working-class.  The 
resumption  of  the  name  and  the  continuance  of  the  work 
of  the  old  Social-Democratic  Federation,  by  many 
active  members  of  that  pioneer  organisation  of  Socialist 
propaganda  in  Great  Britain,  remind  me  of  the  enthu- 
siasm with  which  we  all  worked  for  the  cause  from  1880- 
81  onwards,  and  I  think  I  can  discern  signs  that  similar 
activity  and  self-sacrificing  vigour  will  be  displayed  in 
the  future  as  in  the  past. 

H.  M.  H. 

13  Weli.  Walk,  Hampstead. 


THE  ECONOMICS  OF  SOCIALISM 


CHAPTER  I 

METHODS    OP   PRODDCTION 

Thanks  to  the  work  which  has  already  been  done,  no- 
body now  talks  as  if  our  present  methods  of  producing 
wealth  had  been  permanent  ever  since  private  property 
broke  up  the  old  communal  forms.  I  remember  when  the 
majority  even  of  educated  people  spoke  as  if  the  system  of 
production  under  which  we  are  now  living  —  that  is, 
production  for  profit  and  exchange  —  had  lasted  through 
all  the  centuries,  and  they  went  back  to  the  history  of 
Greece  and  Eome,  of  Carthage  and  of  Egypt,  and  en- 
deavoured to  prove  that  there  were  prevailing  in  those 
ancient  empires  the  very  same  forms  and  ideas  which  we 
have  in  London  and  in  England  at  the  beginning  of  the 
Twentieth  Century.  This  fallacious  method,  I  am  glad  to 
say,  is  now  quite  exploded.  The  historical  school  has  so 
completely  swept  away  the  old  empirical  teaching  that  now- 
adays it  is  no  longer  necessary  to  insist  upon  the  truth 
that  economic  conditions  have  changed  so  greatly  as  to 
render  it  impossible  to  apply  the  ideas  and  expressions  of 
one  period  of  production  to  those  of  another. 

When  once  we  recognise  that  such  phrases  as  "History 
invariably  repeats  itself,"  "  What  has  been  always  will  be," 
"  It  is  contrary  to  human  nature,"  "  Nobody  would  work 
unless  he  saw  some  profit  in  it "  are  the  commonplaces 
of  the  ignorant,  a  closer  investigation  inevitably  follows. 

Nothing  is  more  dilEcult  than  to  read  oneself  fully  into 
a  past  system  of  society  and  to  understand  its  industrial 

1 


2  THE  ECONOMICS  OF  SOCIALISM 

and  social  relations.  It  is  hard  enough  to  comprehend 
societies  in  different  stages  of  development  which  still 
exist  in  our  own  day.  But  when  we  try  to  transport  our- 
selves in  imagination  into  the  minds  of  men  of  an  entirely 
different  race  at  distant  periods,  such  comprehension  be- 
comes doubly  hard.  Happily,  many  of  these  social  and 
industrial  forms  can  still  be  seen  around  us,  though,  in 
most  cases,  their  higher  developments  have  faded.  It  is 
true,  in  a  wide  iense^  that  we  can  trace  the  industrial  and 
social  history  of  man  on  our  planet  from  the  aborigines  of 
Australia,  the  bushmen  of  South  Africa,  the  natives  of 
Patagonia,  and  the  hillmen  of  India,  up  to  the  highest 
development  of  capitalist  civilization  in  Great  Britain  or  the 
United  States  of  America.  All  these  forms  of  society  can 
be  surveyed  at  the  present  time,  and  have  been  described 
by  men  who  have  devoted  themselves  to  their  investiga- 
tion. If,  therefore,  we  wish  to  understand  a  little  as  to 
what  men  were  and  how  they  lived  in  past  ages,  we  can  see 
something  like  them  in  these  various  communities,  whose 
social  development  is  so  much  behind  our  own. 

It  is  now  a  commonplace  of  our  knowledge  that  man- 
kind, in  the  earlier  stages  of  its  existence,  lived  under 
communism.  All  writers  of  any  note  on  the  early  history 
of  man  are  agreed  upon  this.  Such  men  as  Sir  John 
Lubbock,  Mr.  Taylor,  Mr.  Herbert  Spencer,  Lewis  H. 
Morgan,  Von  Maurer,  Bachofen  and  others  express  no 
doubt  whatever  that  the  earliest  form  of  society  was  a 
Tude  communism.  Being  now  at  the  point  when,  after 
the  successive  periods  of  development  under  private  prop- 
erty, we  are  on  the  eve  of  a  great  transformation  back  to 
our  starting-place  on  an  almost  infinitely  higher  plane, 
this  early  communism  has  a  special  interest  for  us.  If  we 
look  through  the  development  of  nature  we  shall  find  that 


METHODS  OF  PKODUCTION  3 

the  same  law  apparently  governs  all  organic  and  inorganic 
growths.  In  the  case  of  an  ear  of  corn,  for  instance. 
There  is  the  seed  which  you  sow :  this  is  split  up  or  differ- 
entiated in  the  earth,  and  then  it  reappears  in  the  ear 
again,  but  on  a  higher  plane. 

In  the  celestial  sphere  we  can  trace  the  operation  of  the 
same  law  from  the  nebulae  to  the  various  galaxies  back  to 
their  point  of  origin  again.  In  the  organic  world  and 
animal  life  we  detect  a  similar  process  going  on.  These 
and  similar  illustrations  seem  to  show  that  the  same  law 
pervades  all  nature.  It  is  a  reasonable  hj^othesis,  which 
is  now  being  verified  under  our  eyes,  that  this  law  likewise 
applies  to  the  development  of  man  in  society.  If  this  is  so, 
then  the  last  development  of  human  society  will  be  nearer 
in  form  to  its  original  starting-point  than  to  any  of  the 
intermediate  stages.  As  we  began  in  the  early  history  of 
our  race  with  narrow,  tribal  communism,  provided  with 
and  based  upon  small  means  of  production;  so  we  are  now 
proceeding  to  world-wide  communism  on  an  immensely 
higher  plane;  in  accordance  with  the  greater  powers  over 
nature  which  we  possess,  as  the  result  of  greater  knowledge 
and  closer  intercommunication. 

Manifestly,  we  are  not  now  at  the  beginning,  or  even 
at  the  middle,  of  the  capitalist  period  of  production.  All 
the  signs  which  betoken  the  close  of  a  cycle  may  be  de- 
tected at  the  present  time.  Admitting  this,  then  the  long 
process  of  splitting  up  from  the  earlier  communism  is  at 
an  end,  and  the  recombination  in  the  shape  of  the  higher 
and  final  communism  is  at  hand.  Those  who  try  to  draw 
a  distinction  between  evolution  and  revolution,  or  speak  of 
evolutionary  and  revolutionary  Socialism  and  Socialists, 
misunderstand  the  entire  theory  of  sociological  develop- 
ment, as  formulated  by  the  whole  scientific  Socialist  school. 


4  THE  ECONOMICS  OF  SOCIALISM 

'Eevolution  simply  means  that  the  evolution  of  society  has 
reached  the  point  where  a  complete  transformation,  both 
external  and  internal,  has  become  inevitable. 

No  man  and  no  body  of  men  can  make  such  a  revolution 
before  the  time  is  ripe  for  it;  though,  as  men  become 
conscious,  instead  of  unconscious,  agents  in  the  develop- 
ment of  the  society  in  which  they  live  and  of  which  they 
form  a  part,  that  they  may  themselves  help  to  bring  about 
this  revolution  peaceably  instead  of  by  violence.  A  suc- 
cessful revolution,  whether  effected  in  the  one  way  or  the 
other,  merely  gives  legal  expression  and  sanction  to  the  new 
forms  which,  for  the  most  part,  unobserved  or  disregarded, 
have  developed  in  the  womb  of  the  old  society.  Force 
may  be  used  at  the  end  of  the  period  as  during  the  incuba- 
tion and  full '■  growth.  It  is  true,  as  Marx  said,  that 
"  force  is  the  midwife  of  progress  delivering  the  old  society 
pregnant  with  the  new  " ;  but,  on  the  other  hand,  force  is 
also  the  abortionist  of  reaction,  doing  its  utmost  to  strangle 
the  new  society  in  the  womb  of  the  old.  Force  itself,  on 
either  side,  is  merely  a  detail  in  that  inevitable  growth, 
which  none  can  very  rapidly  advance,  or  very  seriously 
hinder. 

If,  then,  we  have  at  last  arrived  at  the  end  of  the  long 
series  of  centuries  in  which  private  property  has  been  the 
dominating  factor  in  economics  and  society,  the  early 
communal  forms  have,  I  repeat,  a  special  interest  for  us. 
Not  that  we  shall  return  to  those  precise  social  conditions, 
or  that  our  descendants  will  necessarily  resemble  the  men 
and  women  who  lived  under  them;  but  because  that  form 
of  society  is,  in  its  essentials,  nearer  to  the  one  to  which 
we  are  approaching  than  any  of  the  societies  based  upon 
private  property  could  possibly  be.  Men  have  lived  under 
communism,  as  nomads,  as  savages,  as  village  tribes,  as 


METHODS  OF  PEODUCTION  5 

advanced  barbarians,  vastly  longer  than  they  have  lived 
under  all  the  forms  of  private  property  taken  together. 
The  history  of  man  on  this  planet  has  been  in  the  main 
the  history  of  communism.  Moreover,  mankind  pro- 
gressed from  the  lowest  form  of  savagery  up  to  the  very 
frontiers  of  civilisation  under  this  social  arrangement;  in 
which  the  ownership  of  the  means  of  making  wealth  was 
in  the  hands  of  the  gens  or  the  tribe,  and  the  distribu- 
tion was  in  accordance  with  the  needs  of  the  various 
members  of  the  community.  Though  each  of  these  social 
units  was,  in  the  earlier  stages,  at  war  with  every  other 
similar  unit  harmony  reigned  within  the  little  body  itself. 
Kinship,  not  property  or  locality,  was  the  bond  of  con- 
nection. 

All  the  great  inventions  which  lie  at  the  foundation  of 
our  modern  arts  and  mechanical  appliances  to-day  were 
first  used  under  Communism.  Those  who  contend  that 
inventions  must  fade  under  Socialism,  and  that  no  further 
progress  would  then  be  possible,  overlook,  or  are  ignorant 
of,  the  whole  of  the  early  history  of  mankind.  If  there 
are  any  inventions  in  the  entire  range  of  the  human  appli- 
cation of  the  power  of  nature  to  the  purposes  of  the  race 
which  excel  others  in  ingenuity,  surely  the  wheel,  the  pot- 
ter's wheel,  and  the  bow  and  arrow  deserve  the  first  place. 
Yet  all  of  these  were  discovered  under  Communism.  So 
also  were  the  boat,  the  sail,  the  rudder,  the  oar,  the  stencil 
plate,  fire,  weaving,  rude  printing,  building  in  wood  and 
clay,  decoration,  the  cultivation  of  cereals,  the  taming 
of  animals,  and  the  smelting  of  metals.  It  is  upon  this 
foundation  laid  by  our  ancestors  of  long  ago  that  the 
whole  fabric  of  our  modern  industry  is  built  up.  But  for 
the  work  done  by  these  primitive  Communists,  but  for  the 
efforts  of  the  men  of  genius  who  devoted  their  thought  to 


6  THE  ECONOMICS  OF  SOCIALISM 

the  inventions  and  discoveries  by  which  we  profit,  we  of 
to-day  should  be  living  in  skins  and  depending  on  fish  and 
our  fellow-man  for  the  greater  portion  of  our  food. 

"  The  developments  of  the  power  of  human  production, 
whether  in  agriculture  or  in  manufacture,  are  necessarily 
due  to  a  long  series  of  circumstances  failing  any  one  of 
which  the  improvement  could  not  have  been  made.  The 
introduction  in  agriculture  of  the  turnip,  of  the  potato,  of 
artificial  grasses,  of  rotation  of  crops ;  the  vast  improvement 
in  the  breed  of  domestic  animals;  which  has  enabled  meat 
and  beasts  of  burden  to  be  produced  of  so  much  better 
quality  than  heretofore;  the  properties  of  manures  and 
their  right  application;  the  preservation  of  fish  by  salting 
and  curing,  which  added  so  enormously  to  our  food  supply, 
extending  the  cod,  ling  and  herring  fisheries  to  the  propor- 
tions of  great  industries :  all  these  inventions  are  due  to  the 
combined  observation  and  steady  industry  not  of  one  or 
two  but  of  thousands  or  millions  of  our  race,  though  some 
lucky  individuals  may  be  honoured  for  the  last  crowning  bit 
of  work.  Division  of  labour  again,  whether  adapted  to 
special  advantage  of  soil  and  climate  in  particular  regions 
—  as  wool-growing  in  Australia,  cotton-growing  in  Louisi- 
ana, hunting  and  forestry  in  the  Tyrol,  &c. —  or  devoted 
to  the  abridgment  of  toil  in  workshops  and  factories ;  this, 
one  of  the  most  powerful  engines  for  the  domination  of 
nature  and  the  increase  of  produce,  arises  from  the  long, 
general,  never-ceasing  progress  of  human  society,  and  is  in 
nowise  to  be  laid  to  the  account  of  one  or  more  men  of 
individual  genius. 

"  Precisely  the  same  with  shipping  and  navigation. 
No  man  knows  who  invented  the  mariner's  compass,  or 
who  first  hollowed  out  a  canoe  from  a  log.  The  power 
to  observe  accurately  the  sun,  moon,  and  planets  so  as  to 


METHODS  OF  PEODUCTION  7 

fix  a  vessel's  actual  position  when  far  out  of  sight  of  land, 
enabling  long  voyages  to  be  safely  made;  the  marvellous 
improvements  in  shipbuilding,  which  shortened  passages  by 
sailing  vessels  and  vastly  reduced  freights  even  before 
steam  gave  an  independent  force  to  the  carrier  —  each 
and  all  were  due  to  small  advances  which  together  con- 
tributed to  the  general  movement  of  mankind. 

"  So  with  the  great  industrial  machines  simple  or  com- 
plicated. Who  can  fix  upon  the  actual  discoverers  of  the 
application  of  wool  or  flax,  silk  or  cotton,  hemp  or  jute, 
madder  or  indigo  to  human  use  or  adornment  or  luxury? 
Their  names  are  legion,  doubtless;  but  all  have  been  swept 
away  as  time  has  slowly  swept  its  effacing  figure  over  the 
records  of  the  past.  With  machines  the  same  is  true,  from 
the  simple  wheel,  the  pump,  the  forge,  the  stencil  plate, 
the  potter's  wheel  onwards  to  printing,  steam,  electricity 
and  the  great  machine-making  machines.  Each  owes  all 
to  the  others.  The  forgotten  inventors  live  for  ever  in 
the  usefulness  of  the  work  they  have  done  and  the  prog- 
ress they  have  striven  for, 

"  We  of  to-day  may  associate  mythical  or  noble  names 
with  the  advances  we  specially  remember;  but  too  often 
even  then  the  real  worker  or  discoverer,  if  such  there  were, 
remains  unknown,  and  an  invention  beautiful  but  useful 
in  one  age  or  country  can  be  applied  only  in  a  remote 
generation,  or  in  a  distant  land.  Mankind  hangs  together 
from  generation  to  generation ;  easy  labour  is  but  inherited 
skill;  great  discoveries  and  inventions  are  worked  up  to 
by  the  efforts  of  many  myriads  ere  the  goal  is  reached. 
Those,  therefore,  who  hold  that  the  individual  is  all,  wlio 
contend  that  these  organisers  or  that  class  have  the  right 
to  take  from  their  fellows  in  return  for  the  services  they 
themselves  have  rendered,  do  but  show  their  imorance  of 


8  THE  ECONOMICS  OF  SOCIALISM 

the  whole  unbroken  history  of  human  progress  and  social 
development."  ^ 

The  bed-rock  inventions  of  humanity,  then,  those  inven- 
tions on  which  the  whole  edifice  of  modern  capitalist  in- 
dustrialism is  based,  were  made  under  Communism. 
Various  forms  of  this  primitive  Communism  can  be  studied 
to-day.  There  is,  for  example,  the  Communism  of  the 
Australian  aborigines  who  roam  without  any  fixed  habitat, 
or  live  a  precarious  life  in  the  roughest  and  rudest  way, 
and  yet  possess  a  most  remarkable  weapon  in  the  boomer- 
ang, and  a  social  system  as  strange  to  us  as  it  is  effective 
for  its  immediate  purpose.  The  Communism  of  these,  to 
our  ideas  miserable,  nomads  is  the  lowest  social  life  with 
which  we  are  acquainted,  as  their  knowledge  of  and  com- 
mand over  nature  is  at  the  lowest  point.  Nevertheless, 
their  existence  is  not  unhappy,  and  white  men  who  have 
lived  among  them  testify  to  their  enjojrment  of  life. 

The  Eed  Indians,  many  of  the  tribes  of  South  Africa, 
the  New  Zealanders  and  others,  show  what  magnificent 
specimens  of  mankind  are  developed  under  a  rude  Com- 
munism; while  the  village  Indians  in  the  pueblos  of  New 
Mexico  and  Arizona,  a  quiet,  peaceful  folk,  very  different 
from  such  terrible  savages  as  the  Iroquois,  the  Apaches 
or  the  Sioux,  live  a  happy  and  contented  life  within  the 
walls  of  their  communal  dwellings.  Their  power  of  pro- 
duction is  very  small  indeed  compared  to  ours.  Yet  they 
till  their  fields  skilfully,  have  common  ground  and  garden 
land  in  many  cases,  divide  their  food  communally  after 
it  is  cooked,  and  make  provision  for  bad  times  by  storage 
of  grain.     Their  power  of  production  of  such  food,  and 

1 "  The  Historical  Basis  of  Socialism  "  by  H.  M.  Hyndman, 
p.  90  (1883).  Oddly  enoufjh  this  passage  was  quoted  by  Mr. 
Samuel  Smiles  in  one  of  his  books! 


METHODS  OF  PRODUCTION  9 

of  the  ordinar}'  clothing  and  other  necessaries  of  life,  is 
sufficient  managed  communally  to  sustain  them  in  moder- 
ate comfort. 

As  to  the  village  communities  of  India,  with  their  semi- 
communal  arrangements,  every  historian  of  the  country 
bears  witness  to  the  simple,  happy  life  of  the  inhabitants, 
where  the  old  institutions  are  kept  up,  and  the  villagers 
are  free  from  oppression  above  or  raids  from  without. 
Here,  again,  though  the  power  to  produce  wealth  is  smaU, 
the  condition  of  the  villagers  in  all  the  needs  of  their  simple 
life  is  far  in  advance  of  large  portions  of  our  city  popu- 
lations. They  carry  out  their  necessary  work  without  the 
intervention  of  capital,  and  the  usurer,  though  not  unknown 
in  the  ancient  native  society,  never  obtained  dominance 
in  the  country  districts  until  our  capitalist  rule  gave  him 
the  legal  machinery  to  oppress  with. 

In  Polynesia,  a  quarter  of  a  century  or  so  ago,  the 
early  communal  system  might  be  seen  at  work,  as  in  New 
Zealand  at  an  earlier  date,  almost  untouched  by  European 
influence.  Here  was  evidence  enough  as  to  the  manner 
in  which  works  of  considerable  magnitude  could  be  carried 
out  not  only  without  capital  but  without  any  idea  of  ex- 
change, still  less  of  profit.  The  great  double  canoe,  Ndrua, 
of  the  Fiji  islanders  is,  in  its  way,  quite  as  remarkable  a 
product  of  human  skill,  regard  being  had  to  the  tools 
employed,  as  the  huge  mail  steamers,  the  Lucania,  Cam- 
pania, Majestic,  Teutonic,  or  any  of  the  great  vessels  cross- 
ing the  Atlantic  or  trading  to  India  or  Australia.  There 
is  not  a  single  nail  in  the  canoe,  the  whole  being  held 
together  by  cocoanut-fibre  in  the  form  of  sinnett.  Yet 
every  plank  fits  close  into  its  neighbour,  and  the  whole 
vessel  is  quite  water-tight.  The  deck  itself  is  so  skilfully 
adzed  with  a  flint  adze  that  a  European  carpenter  could  not 


10  THE  ECONOMICS  OF  SOCIALISM 

touch  it  with  his  plane.  Such  a  vessel,  with  a  house  in  the 
middle  covering  the  two  canoes,  will  carry  nearly  two  hun- 
dred men  and  will  sail  from  eight  to  ten  knots  on  a  wind. 
A  canoe  of  this  description  is  constructed  by  the  continu- 
ous work  of  skilled  artificers  extending  perhaps  over  a 
period  of  two  years;  and  while  they  are  engaged  upon  it 
they  are  fed  and  clothed  by  the  labours  of  skilled  agricul- 
turists and  cloth-makers,  male  and  female,  and  provided 
with  fish  and  turtle  by  equally  skilled  fisher-folk.  The 
canoe  when  finished  belongs  to  the  tribe. 

Their  irrigation  works  and  great  huts  are  marvels  of  in- 
genuity. Yet  none  are  overworked,  none  go  short  of  food 
while  others  have  plenty,  and  certainly  the  people  are  ex- 
ceedingly happy,  in  spite  of  certain  hideous  rites  and  cus- 
toms. It  is  impossible  in  such  social  conditions  for  a  few 
to  be  lazy  and  fat  and  others  workless  and  starving  simply 
because  the  power  to  produce  wealth  is  too  great.  If  one 
starved  through  famine  all  starved.  Division  of  labour  in 
the  tribe  was  amicably  and  conveniently  arranged,  and 
provision  was  made  against  famine  in  the  majority  of 
cases  by  storage,  or  by  tabooing  certain  groves  of  fruit- 
bearing  trees  at  periods  of  threatened  dearth.  In  this  re- 
spect great  foresight  was  shown,  and  there  is  no  reason 
for  believing  that  the  methods  of  wealth-production  were 
wholly  stationary.  Small  as  their  means  of  making  wealth 
were,  the  natives  controlled  them,  and  were  not  over- 
mastered by  them. 

Where  the  germs  of  exchange  could  be  traced,  as  in  col- 
lective gifts  by  one  tribal  chief  to  another;  or  in  the  early 
individual  transfer  to  be  seen  in  the  shape  of  the  rude 
form  of  barter  described  in  "  Old  Xew  Zealand  " ;  or  the 
similar  plan  of  "  begging "  articles  which  had  become 
private  property,  as  in  parts  of  Polynesia;  there  it  may 


METHODS  OF  PRODUCTION  11 

be  said  the  development  towards  individual  ownership  had 
already  begun.  But  the  change  in  this  direction,  so  far 
as  we  can  judge,  was  very  slow.  Man  in  society  seems 
to  have  resisted  as  long  as  possible  that  advance  to  pro- 
duction for  individual,  instead  of  communal,  use  which 
nevertheless  was  inevitable  in  the  onward  and  upward 
course  of  the  development  of  the  race.  Personal  property 
in  weapons,  in  skins,  in  decorations,  in  mats  did  not  at 
all  involve  the  economic  predominance  of  class  or  caste, 
or  the  break-up  of  the  communal  system. 

But  slavery  in  any  shape  necessarily  puts  an  end  to  such 
Communism.  It  seems  not  improbable  that  slavery  was 
one  of  the  earliest  forms  of  property,  though  in  the  first 
instance  it  is  also  almost  certain  that  the  slaves  belonged 
to  the  whole  tribe  rather  than  to  any  individual  members 
of  it,  and  it  is  further  a  probability  amounting  to  cer- 
tainty that  slavery  itself  was  due  to  a  direct  economic 
cause. 

When,  for  example,  a  powerful  tribe  had  reached  the 
point  at  which  captives,  either  by  serving  as  shepherds 
or  in  any  other  way,  could  produce  a  good  deal  more  than 
their  keep,  it  became  more  advantageous  to  enslave  them 
than  to  cook  and  eat  them  at  once,  or  to  butcher  them  for 
the  mere  fun  of  the  thing.  Consequently  slavery  was  a 
distinct  social  advance  and,  monstrous  as  chattel  slavery 
may  seem  to  the  dominant  class  of  to-day,  who  are  in  con- 
trol of  a  more  hypocritical  system  of  private  property  in 
man,  it  was  a  necessary  step  in  the  long  series  of  changes. 
Chattel  slavery  was  the  economic  basis  of  all  the  great 
civilisations  and  of  all  the  so-called  democracies  of  an- 
tiquity. But  the  history  of  all  those  civilisations  shows 
how  hard  the  old  gentile  and  communal  forms  died. 

With  slavery  tlie  accumulation  of  wealth  in  private  hands 


12  THE  ECONOMICS  OF  SOCIALISM 

grew  apace.  Exchange  between  individuals  replaced  col- 
lective exchange.  Their  private  property  as  individuals 
became  a  series  of  products  for  the  market.  Herein  is  the 
secret  of  the  whole  transformation  which  followed.  As 
soon  as  the  producers,  instead  of  using  their  own  product 
and  enjoying  it  with  their  fellows,  ceased  to  control  it 
directly,  but  let  it  go  out  of  their  own  hands  for  exchange 
against  other  products,  they  lost  all  power  over  it.  They 
could  no  longer  either  determine  or  even  know  what  should 
become  of  it.  The  product  which  escaped  from  them  in 
this  way  might  even  be  turned,  and  as  a  matter  of  fact 
actually  was  turned,  against  the  producers  themselves  and 
became,  in  spite  of  all  they  could  do,  the  means  of  robbery 
and  oppression. 

With  the  production  of  goods  for  exchange  came  the 
tillage  of  the  soil  by  individuals  for  their  own  gain  and 
enrichment,  and  shortly  thereafter  individual  ownership 
of  land.  Common  land  might  well  be  tilled  for  individual 
advantage  before  actual  private  ownership  of  land  became 
the  rule,  and  that  this  was  so  appears  from  many  evidences. 
But  with  the  development  of  individual  production  of  goods 
for  exchange  money  also  arose,  that  universal  commodity 
against  which  all  the  others  could  be  exchanged.  Here, 
however,  was  another  new  economic  and  social  power  which 
men  invented  without  the  slightest  idea  of  the  enormous 
control  it  would  obtain  over  themselves,  whether  they  liked 
it  or  not.  Incapable  as  they  were  of  comprehending  its 
full  social  significance,  they  soon  learned  by  bitter  experi- 
ence that  money  represented  the  sole  universal  all-pervad- 
ing power  before  whose  throne  society  must  inevitably 
prostrate  itself.  At  all  the  great  centres  of  ancient  civili- 
sation this  money-power  made  its  appearance  in  its  most 
cruel  and  brutal  shape,  without  the   slightest  reference 


METHODS  OF  PEODUCTION  13 

to  the  desires  or  feelings  of  those  who  were  dominated  by  it. 

Slavery,  merely  as  slavery,  was  not  incompatible  with 
the  maintenance  of  a  communistic  or  semi-communistic 
tribal  system  above  the  slaves.  Examples  of  this  form  of 
society  can  be  found  at  the  present  time.  The  slaves  were 
an  inferior  portion  of  the  tribe,  or  gens,  or  family,  but  the 
old  kinship  and  the  old  communism  still  reigned.  But  no 
sooner  did  exchange  and  money  begin  to  work  their  way 
than  the  break-douTi  commenced.  Private  property,  ac- 
cumulation of  wealth  used  to  acquire  more  wealth,  such  was 
the  inevitable  progression.  Division  of  labour  into  various 
branches,  crystallised  in  many  cases  into  rigid  castes  — 
agriculture,  handicraft,  trade,  shipping,  &c. —  soon  fol- 
lowed. Money  and  trade  steadily  forced  a  path  for  them- 
selves through  the  ancient  conservative  arrangements. 

But,  it  was  a  comparatively  slow  process  in  every  case. 
For  many  centuries  the  individual  production  which  gradu- 
ally supplanted  primitive  and  developed  Communism,  aided 
by  a  number  of  slaves  who  were  reckoned  a  portion  of  the 
family,  strove  hard  to  hold  its  own  against  organised  slave 
production  on  a  large  scale,  with  its  more  complete  division 
of  labour  and  rapidly-accumulated  wealth. 

The  history  of  the  development  is  precisely  similar  in 
each  case.  A  settlement  of  tribes  gathers  round  a  common 
centre,  bound  together  within  themselves  not  by  local  as- 
sociation, still  less  by  ownership  of  the  land,  but  by  those 
close  ties  of  gentile  kinship,  the  key  of  which  Morgan 
found,  and  applied  for  us  to  the  solution  of  such  early  com- 
binations. By  slow  degrees,  as  such  settlements  became 
powerful  and  afforded  security  against  the  general  state  of 
war  without,  numerous  other  folk  standing  quite  outside 
the  original  tribe  arrangements  gathered  round  the  settle- 
ments. 


14  THE  ECONOMICS  OF  SOCIALISM 

Simultaneously  private  property  displaced  Communism. 
Wealth,  trade  and  commerce  grew  apace.  As  the  popula- 
tion increased,  which  had  no  gentile  ties  with  the  original 
settlers,  these  "  old  families  "  formed  an  aristocracy  at  the 
top,  and  classes  began  to  be  formed.  The  conflicting  mo- 
tives of  kinship  and  property  were  in  perpetual  antagonism. 
The  revolutionary  idea  as  expressed  in  property  and  local 
habitation  inevitably  won.  Eights  based  on  property  quali- 
fication and  such  local  habitation,  became  sooner  or  later 
supreme  over  the  ancient  gentile  relations.  Individual 
labour  on  the  land  and  private  property  in  the  products 
and  eventually,  as  already  said,  in  the  land  itself,  became 
the  dominant  form  of  production.  Slavery  spread  owing 
to  conflicts  with  neighbouring  tribes.  As  conquests  ex- 
tended, or  federations  were  formed,  slavery  became  more 
powerful  as  a  factor  of  production.  Still  more  conquests 
extended  the  system :  exchange  and  money  had  the  greatest 
influence,  and  the  class  separation  became  definite  and  ac- 
knowledged ;  though  slave  production  and  free  labour  went 
on  side  by  side. 

Then  arose,  likewise  in  every  case  and  from  the  same 
cause,  the  tremendous  question,  above  the  mere  arrange- 
ments of  production  —  the  question  of  debtors  and  credit- 
ors. Private  owners  of  land  and  property  who  were  com- 
pelled by  temporary  needs  of  any  kind  to  borrow  money, 
the  universal  equivalent,  found  themselves  at  the  mercy 
of  their  creditors.  These  creditors  themselves  were  the 
direct  ancestors  of  the  modern  money-lords  and  capitalists. 
They  were  merchants  and  middle-men,  for  the  most  part, 
who  accumulated  money  by  standing  between  the  producer 
and  consumer,  and  fleecing  both.  Having,  as  a  rule,  no 
direct  connection  with  the  old  society,  out  of  which  the 
new  revolutionary  forms  of  which  they  were  the  human 


METHODS  OF  PEODUCTION  15 

exponents  were  evolving,  they  had  no  mercy  whatever  upon 
those  who  became  indebted  to  them. 

Ancient  history  is  full  of  the  cruelties  wrought  upon  un- 
fortunate debtors  by  creditors  of  old  times.  A  man  who 
could  not  pay  was  practically,  himself,  wife  and  children, 
at  the  disposal  of  the  person  to  whom  he  was  indebted. 
Humanity  never  entered  into  the  question  at  all.  A  bitter 
and  bloody  class  struggle  followed.  Invariably  the  State 
or  community  at  large,  chaotic  from  our  point  of  view  as 
its  relations  then  were,  was  compelled  to  interfere  on  the 
side  of  the  indebted  classes  in  order  to  prevent  continuous 
bloodshed  and  eventual  disruption. 

The  money-lending  and  usury  of  ancient  times  were  a 
trading  upon  the  necessities  of  the  borrowers,  and  the  whole 
system  was  so  manifestly  an  ethical  wrong,  running  quite 
counter  to  the  kinship  and  communal  ties  from  which  so- 
ciety was  but  just  breaking  loose,  that  it  was  denounced 
throughout  antiquity  not  only  by  the  pagan  moralists  but 
even  at  a  much  later  date  by  the  Fathers  of  the  early 
Christian  Church. 

The  cruelty  of  economic  progress,  however,  is  as  terrible 
as  the  cruelty  of  nature.  It  takes  no  acount  of  the  feelings, 
or  passions,  or  desires  of  mankind.  It  entirely  disregards 
their  morals  and  their  souls.  There  is  no  place  for  re- 
ligion, natural  or  supernatural,  in  economics.  Dominate 
or  be  damned.  Be  master  or  be  slave.  Your  sentiment 
and  your  soul  are  equally  dependent  on  your  belly.  If  the 
latter  be  not  filled  the  former  cannot  function.  Only  when 
the  material  basis  of  individual  and  social  life  is  fully 
assured  does  the  higher  development  of  human  intelligence 
and  character  become  possible.  Slavery  was  an  inevitable 
stage  in  the  upward  path  of  humanity;  and  that  debtors 
should  be  subservient  to  creditors  was  likewise  a  natural 


16  THE  ECONOMICS  OF  SOCIALISM 

result  of  what  had  gone  before  and  a  preparation  for  that 
which  was  to  come  after. 

The  great  majority  were  wholly  unconscious,  then  as  ever 
since,  of  what  was  going  on  around  them.  Exchange  and 
money,  private  production  for  a  market  and  slave  produc- 
tion for  luxury  slowly  swept  away  all  that  remained  of  the 
old  gentile  and  communal  society.  The  pressure  of  wealth 
in  every  instance  became  greater  and  greater  until  the 
slave  system  of  cultivation  was  finally  predominant  and 
slave  production  became  practically  universal,  almost  crush- 
ing out  the  free  workers  as  an  economic  force.  The  upper 
stage  of  barbarism  gave  division  of  labour  between  agricul- 
ture and  manufacture :  the  first  stage  of  civilisation  con- 
firmed this  division  and  pushed  it  much  further.  Slaves 
who  toiled  on  the  land,  in  the  cities,  or  in  the  mines,  were 
worked  in  larger  or  smaller  masses  according  to  the  wealth 
of  their  owners;  and  were  treated  cruelly  or  kindly  ac- 
cording to  the  general  social  relations  or  the  character  of 
their  immediate  masters.  But  whether  treated  compara- 
tively well,  as  they  were  by  the  Greeks,  or  with  cruelty,  as 
they  were  by  the  Romans  and  Carthaginians;  whether 
scourged  and  killed  by  Cato,  op  dealt  with  considerately 
by  Crassus,  they  remained  as  much  chattels,  for  the  most 
part,  as  the  horses- and  oxen  around  them. 

Even  those  slaves  who  held  superior  positions  could  not 
rely  upon  being  better  treated,  and  it  is  interesting  to 
note,  in  passing,  that  the  slave  "  captain  of  industry,"  the 
vilUcus,  received  a  less  ration  than  those  whose  labour 
he  organised,  on  the  express  ground  that  such  managerial 
work  was  far  less  exhausting  than  manual  labour.  All  that 
the  slaves  produced,  over  and  above  their  keep,  belonged  to 
their  masters,  and  it  was  of  course  by  no  means  only  the 
rough  and  uneducated  who  were  in  this  position  of  sub- 


METHODS  OF  PEODUCTION  It 

servience.  Plato,  the  great  idealist  philosopher  of  an- 
tiquity, was  sold  as  a  slave,  and  could  only  be  released 
at  a  heavy  cost.  Aesop,  the  famous  fabulist,  was  also  a 
slave,  and  many  other  men  of  ability  were  born  or  were 
forced  into  the  like  condition.  Highly-trained  slaves  con- 
stituted the  most  important  part  of  the  wealth  of  the  great 
Roman  land  and  slave  owner,  and  next  to  them  in  impor- 
tance came  his  land,  his  mines,  &c.  Writers,  copyists, 
artists,  decorators,  gold  and  silver  smiths,  skilled  crafts- 
men of  every  kind;  these  are  enumerated  as  more  valuable 
than  all  his  other  property  put  together. 

The  wealth  which  was  piled  up  l^y  these  huge  armies  of 
slaves,  skilled  and  unskilled,  educated  and  uneducated,  was 
enormous:  relatively  greater,  probably,  in  the  case  of  the 
Romans,  than  anything  known  in  the  history  of  the  human 
race  until  the  Vanderbilts,  the  Jay  Goulds,  the  Rockefellers 
and  Astors  laid  hands  upon  tens  of  millions  sterling  on  the 
other  side  of  the  Atlantic.  That  Lepidus  should  have  been 
able  to  maintain  a  large  army  in  the  field  at  his  own  cost; 
that  Hannibal  could  support  himself  and  his  armies  in  Italy 
for  seventeen  years,  largely  from  the  slave-produced  silver 
of  his  mines  in  Spain  —  are  as  remarkable  examples  of  in- 
dustrial wealth  as  the  fact  that  Gaesar  could  find  money- 
lenders prepared  to  advance  him  at  least  £3,000,000  on  the 
chance  that  he  would  make  his  way  to  the  chiefdom  of  the 
Roman  Republic.  And  these  instances  of  huge  fortunes 
are  drawn  from  the  period  anterior  to  the  completest  de- 
velopment of  the  system. 

Obviously,  the  chattel-slave  system  of  production,  though 
much  nearer  to  our  present  wage-slave  system  of  produc- 
tion than  either  Feudalism  or  Communism,  was  very  differ- 
ent from  it.  Where  this  method  of  production  prevailed 
the  producers  as  well  as  their  product  equally  belonged  to 


18  THE  ECONOMICS  OF  SOCIALISM 

the  master.  The  one  could  as  well  be  sold  by  him  as  the 
other.  Much,  or  even  most,  of  the  produce  of  his  slaves 
might  go  into  exchange  and  be  sold  for  money,  but  the 
great  land  and  slave-owner  of  Greece  or  Eome  or  Carthage, 
or  Asia  Minor  was  assuredly  not  a  capitalist  in  our  modern 
sense.  His  wealth  was  used  for  his  own  luxury  or  to 
augment  his  fame.  He  did  not  enter  upon  production 
primarily  to  build  up  the  means  of  creating  more  wealth. 
The  whole  social  relations  were  different:  the  methods  used 
and  the  end  aimed  at  were  quite  dissimilar. 

And  yet  the  effects  produced  were  in  many  respects  super- 
ficially the  same.  From  the  side  of  the  slaves  themselves, 
for  example.  The  slaves  of  antiquity  took  their  position 
for  granted.  It  was  in  the  nature  of  things  and  inevitable, 
just  as  our  wage-slaves  of  Europe  and  America  to-day  for 
the  most  part  regard  their  economic  subservience  as  un- 
changeable. They  could  not  imagine  a  society  existing 
without  slaves.  And  the  ablest  philosophers  were  of  much 
the  same  opinion.  Aristotle  himself,  the  ablest  and  most 
profound  thinker  of  all  antiquity,  could  not  see  how  it  was 
possible  to  dispense  with  this  basic  institution,  "  except 
perhaps  by  the  aid  of  machines  " ;  and  that  he  should  have 
seen  even  so  far  is  a  testimony  the  more  to  his  extraordinary 
ability.  Yet  the  numbers  of  the  slaves  were  practically 
overwhelming. 

In  Athens  there  were  90,000  free  citizens,  men,  women 
and  children  included,  as  against  365,000  slaves  and  45,000 
slave  police.  Corinth,  Egina,  Sparta  show  a  similar  dis- 
proportion. In  Eome  the  disparity  was  still  greater.  Yet, 
though  the  whole  of  the  governing  classes,  in  spite  of  their 
intestine  feuds,  more  than  once  displayed  considerable  fear 
as  to  what  the  slaves  might  do,  the  risings  against  the 
economic  tendency  of  the  time,  when  they  did  occur,  were 


METHODS  OF  PRODUCTION  19 

by  no  means  so  formidable  as  from  a  superficial  view  might 
liave  been  expected.  Even  the  hideous  cruelty  with  which 
they  were  treated  in  the  mines  of  Asia  Minor,  Greece  and 
Spain  rarely  drove  them  to  revolt;  though,  when  they  did 
rise,  their  insurrections  were  suppressed  with  a  bloody 
brutality  never  excelled  even  by  the  dominant  classes  of 
modern  times.  Their  overwhelming  numbers  in  the  cities 
would  have  given  them  at  a  later  date  a  far  better  chance 
of  success,  had  they  been  able  to  combine  in  one  fierce  on- 
slaught on  their  masters. 

The  whole  history  of  the  great  slave  period  shows  indeed 
how  impossible  it  is  to  bring  about  a  change  in  class  re- 
lations until  the  form  of  production  is  ripe  for  transforma- 
tion, and  men's  minds,  unconsciously  to  themselves,  take 
the  course  which  is  prescribed  for  them  by  the  historic 
development  of  social  and  economic  forms. 

As  slave-production  grew  and  wealth  expanded  honest 
labour  became  shameful.  A  Cincinnatus  commanding  vic- 
torious armies  in  the  field  and  then  returning  to  his  farm 
and  homely  domestic  life  would  have  been  quite  impossible 
under  the  Antonines.  Any  successful  general  who  so  de- 
graded himself  would  have  been  regarded  by  all  mankind 
as  a  drivelling  old  dotard.  The  view  of  labour  was  much 
the  same  under  the  Roman  Empire  as  it  is  really  in  London 
to-day  —  a  toilsome  and  degrading  expenditure  of  time. 

As  slave  production  also  crushed  by  its  competition  the 
independent  efforts  of  free  men,  a  class  was  developed  an- 
swering to  the  free  whites  of  the  belated  chattel  slavery 
in  the  Southern  States  of  America  and  the  West  India 
Islands.  These  people  in  all  the  great  cities,  but  more 
particularly  in  Rome,  had  the  good  luck  to  possess  political 
power  which  could  not  be  taken  from  them.  As  a  result 
they  were  flattered  and  fed  by  the  governing  classes,  who 


20  THE  ECONOMICS  OF  SOCIALISM 

effected  a  cheap  insurance  of  their  economic  and  social 
predominance  by  liberal  allowances  of  food  and  a  huge 
expenditure  on  shows.  But  the  seamy  side  of  slave  pro- 
duction was  not  long  in  turning  itself  to  the  community. 
This  exhausting  method  of  cultivation  practically  ruined 
Italy  at  a  comparatively  early  period;  Rome  became  entirely 
dependent  upon  foreign  sources  for  its  food  supply;  and 
the  inhabitants,  rich  and  poor  alike,  had  many  a  bad  quar- 
ter of  an  hour  when  the  arrival  of  the  grain  ships  from 
Egypt  or  the  Euxine  was  unduly  delayed  by  bad  weather. 

From  that  time  forward  Eome,  with  its  slave  production 
and  turbulent  population,  became  almost  as  complete  a 
world-market  for  wealth  and  articles  of  luxury  of  every 
description,  almost  as  huge  a  vampire  sucking  riches  by 
tribute  from  all  parts  of  the  earth,  as  London  or  England 
herself  is  to-day. 

And  what  an  Empire,  what  a  civilisation,  what  wealth, 
what  luxury,  what  excess  was  thus  due  to  the  generations 
of  human  cattle  who  toiled  hopelessly  on,  producing  wealth 
for  others  and  bare  subsistence  for  themselves !  There  is 
nothing  more  imposing  in  history.  Its  roads,  which  still 
exist,  built  by  the  free  labour  of  the  legionaries,  extending 
unbroken  from  one  end  of  Europe  to  the  other ;  its  adminis- 
tration so  complete  and  all-pervading  that  there  was  no 
escape  from  its  justice  or  its  vengeance ;  its  peace  within 
its  borders  so  profound  that  even  the  bloody  struggles  of 
rival  Emperors  for  supreme  power  scarcely  troubled  the 
calm  of  the  surface;  its  innumerable  public  works  so  solid 
and  yet  so  splendid  that  the  ablest  of  modern  engineers 
gaze  with  admiration  on  the  work  of  the  greatest  builders 
that  the  world  ever  saw;  its  military  system  so  complete 
in  every  part  that  victory  seemed  reduced  to  a  certainty, 
and  defeat  became  merely  one  of  those  casual  accidents 


METHODS  OF  PEODUCTION  21 

which,  as  a  matter  of  business,  had  at  once  to  be  repaired. 

Stretching  as  it  did  to  the  uttermost  parts  of  the  earth, 
having  full  mastery  here  in  Britain  for  over  400  years, 
while  it  had  equal  hold  on  the  remotest  confines  of  Asia 
Minor,  controlled  by  men  who  in  their  trained  capacity 
for  domination  in  all  forms  have  never  seen  their  equals 
on  the  planet  —  this  extraordinary  organisation  seemed 
constructed  to  last  for  ever.  To  a  Eoman  of  the  great 
days  of  the  Empire  it  might  well  have  appeared,  as  he 
looked  round  on  the  magnificent  cities  so  connected  and 
so  ruled,  that  such  a  structure,  like  their  roads,  their 
aqueducts  and  their  bridges,  could  never  perish  nor  decay. 
All  modern  empires  seem  mushrooms  in  comparison  with 
this.  Slow  and  majestic  in  its  growth:  slow  and  majestic 
in  its  decay. 

The  mills  of  economics,  however,  like  the  mills  of  God, 
grind  slowly  but  they  grind  exceeding  small.  The  slave 
culture  and  manufacture  which  looked  to  the  ablest  minds 
as  if  it  must  endure  for  ever  and  which  never  appeared  more 
secure  than  immediately  before  its  final  collapse  —  that 
system,  like  others,  came  to  its  end  from  economic  causes 
at  work  from  the  first.  Luxury  and  debauchery,  un- 
equalled perhaps  before  or  since,  reigned  above:  the  direst 
and  most  hopeless  poverty  festered  below.  The  provinces 
were  bled  to  death  by  excessive  tribute;  the  slaves  were 
driven  to  death  by  excessive  overwork:  free  farmers  were 
ruined  by  usurers  and  robbers.  Mercenaries  of  the  greedi- 
est kind  took  the  place  of  the  old  independent  Eoman 
legionaries;  and  pimps  and  eunuchs  were  the  cherished 
philosophers  of  the  rich.  Yet  none  could  recognise  the 
rapid  approach  of  the  catastrophe  which  now  seems  to  all 
to  have  been  so  clearly  impending. 

Finally  came  the  overthrow  of  the  whole  edifice,  at  any 


2%  THE  ECONOMICS  OF  SOCIALISM 

rate  in  Western  Europe.  The  great  barbarians  who  in- 
vaded the  decrepit  Empire  found  a  very  different  state  of 
things  from  that  which  their  ancestors  had  encountered 
a  few  centuries  before.  Their  arrival  but  hastened  on  the 
inevitable  downfall,  and  provided  at  the  same  time  the 
means  for  reconstruction.  To  the  mass  of  the  city  popu- 
lations patriotism  was  a  forgotten  word:  to  the  miserable 
slaves  no  change  could  be  for  the  worse.  Consequently, 
there  was  no  resistance  capable  of  withstanding  wave  after 
wave  of  invasion,  and  the  greatest  chattel-slave  Empire 
of  antiquity  fell.  There  followed  a  long  period  of  transi- 
tion and  disruption,  and  amid  this  apparent  chaos  new 
growths  took  root  and  sprang  up.  Eoads  fell  into  dis- 
repair, local  markets  necessarily  replaced  the  Eoman  mar- 
ket, local  forces  overcame  imperial  power.  At  last,  at 
varying  periods,  the  feudal  S3^stem,  as  we  know  it,  became 
the  prevailing  organisation  over  Western  Europe. 

Here  we  arrive  at  the  second  of  the  great  forms  of  pro- 
duction by  an  inferior  class  consequent  upon  the  institu- 
tion of  private  property. 

The  arrangements  were,  however,  in  many  respects  more 
complicated  than  those  which  arose  out  of  chattel-slavery. 
Villenage  or  serfdom  by  which  the  mass  of  the  common 
people  dwelling  on  the  soil  fell  under  the  yoke  of  the 
feudal  lord  never  overcame  free  labour  as  slavery  did,  and 
the  relations  of  lord  and  serf  differed  materially  from  those 
which  existed  between  master  and  slave.  Working  on  the 
land,  the  villeins  could  not  be  removed  from  it  for  sale, 
but  the  lands  when  disposed  of  carried  with  them  their 
serfs.  The  duties  of  these  serfs  varied  materially  in  differ- 
ent parts  of  Europe,  and  in  many  respects  they  had  little 
reason  to  congratulate  themselves  on  holding  a  superior 
position  to  their  economic  predecessors  in  servitude. 


METHODS  OF  PEODUCTION  23 

But  in  the  main  the  difference  between  the  serfs  and  the 
chattel  slaves  lay  in  the  fact  that  churls  and  villeins  as 
they  were,  liable  as  they  might  be  to  ill-treatment  and  mur- 
der at  any  moment  at  the  caprice  of  their  lord,  they  were 
recognised  as  possessing  some  right  to  their  soil.  Thus 
they  were  permitted  in  the  majority  of  cases  to  work  so 
many  days  for  themselves  as  against  an  equal  or  greater 
number  of  days  that  they  were  bound  to  devote  to  tillage, 
forestry,  quarrying,  or  other  services  for  their  lord.  Most 
of  the  total  production  of  the  country  was  thus  due  to 
their  ill-requited  toil.  When,  however,  ill-housed,  ill-fed, 
and  subject  to  all  sorts  of  indignities,  they  rose  against 
their  noble  and  chivalrous  overlords,  they  were  butchered 
and  tortured  even  more  relentlessly  by  the  finest  spirits  of 
the  time  than  the  unfortunate  slaves  were  by  the  leading 
minds  of  ancient  Rome. 

In  this  respect,  indeed,  there  was  little  to  choose  between 
the  most  saintly  catholic  knight  and  the  earliest  develop- 
ment of  the  hypocritical  nonconformist  conscience;  seeing 
that  Martin  Luther,  at  the  very  close  of  the  period  of  serf- 
dom and  villenage,  was  as  relentless  a  persecutor  of  the 
revolting  German  Bauers  as  the  Capital  de  Buch,  du 
Guesclin,  and  Edward  the  Black  Prince  were  the  ruthless 
slaughterers  of  the  French  Jacquerie,  or  the  Russells, 
Cecils  and  Howards  the  gentle  butchers  of  the  English 
peasantry.  Butcheries  of  this  sort,  by  the  dominant  class 
of  the  people,  are  pure  matters  of  business,  and  the  religion- 
ists and  moralists  of  the  period  are  always  careful  to  de- 
nounce the  criminality  of  the  weaker  side.  In  any  case, 
the  futile  risings  of  the  peasantry  on  the  continent,  and 
even  in  England,  so  long  as  the  feudal  system  retained 
its  first  vigour,  show,  as  the  similar  hopeless  risings  of  the 
slaves  proved  before,  how  futile,  except  for  the  satisfaction 


24  THE  ECONOMICS  OF  SOCIALISM 

of  a  temporary  but  legitimate  vengeance,  are  insurrections 
of  the  people  until  the  time  is  economically  ripe  for  an- 
other stage  in  the  development. 

The  villeins  formed  the  main  part  of  the  unskilled  and  a 
portion  of  the  skilled  labourers  during  the  predominance 
of  the  feudal  system,  and  unsatisfactory  enough  was  their 
method  of  cultivation  and  work.  But  most  of  the  barons 
and  their  retainers,  the  lords,  thanes,  and  freemen,  lived 
in  a  rude  plenty;  while  some  of  the  richer  feudal  lords, 
lay  and  cleric,  had  around  them  an  amount  of  comfort 
and  luxury  which,  if  not  equal  to  that  of  the  Eoman  or 
Byzantine  nobles,  was  still  very  great. 

Side  by  side  with  serfdom,  also,  was  the  large  body  of 
free  workers,  in  country  and  town  alike,  who  no  longer 
regarded  labour  as  in  any  way  degrading,  and  who  had 
inherited  from  the  barbarian  invaders,  or  had  acquired 
from  them,  notions  in  regard  to  general  freedom  and  col- 
lective ownership  which  placed  them  in  a  very  different 
position  from  that  of  the  mere  emancipated  slave  or  predial 
serf.  Free  peasants  and  free  artisans,  whatever  dues  they 
might  owe  and  pay  to  their  lords  in  return  for  privileges 
or  services,  were  as  free  economically  as  men  in  that  day 
could  be.  Gathering  round  the  castle  for  protection 
against  the  robber  hordes  or  legitimate  invaders  of  their 
territory,  or  clustered  in  fortified  cities  —  whose  narrow 
streets  and  lofty  houses  show  to-day  how  crowded  these 
fortresses  became  —  the  artisans  and  craftsmen  carried  on 
their  trades  in  democratic  guilds  with  strictly  limited  ap- 
prenticeships, and  showed  from  time  to  time,  throughout 
the  continent  as  well  as  in  Great  Britain,  that  they  knew 
very  well  how  to  protect  their  freedom  against  any  attempt 
at  encroachment  by  the  feudal  superiors,  to  whom  they 
were  nominally  or  really  subject.     Still,  in  these  relations, 


METHODS  OF  PRODUCTION"  25 

there  was  no  capitalism  in  the  modern  sense.  Though 
banks  and  banking  were  beginning,  and  exchange  was  as- 
suming something  of  its  modern  features,  the  wealth  of  a 
great  baron  or  prince  of  the  Church,  great  as  it  often  was  in 
every  respect,  was  due  in  no  sense  to  the  use  of  his  capital 
or  to  the  gains  which  he  made  by  direct  trade. 

As  communication  after  the  break-down  of  the  Eoman 
roads  and  the  collapse  of  all  central  authority  became  in- 
creasingly difficult,  production  in  the  interior  of  most  of 
the  detached  provinces  into  which  Europe  was  thus  spilt 
up  was  carried  on  chiefly  for  immediate  use  of  the  pro- 
ducers and  their  families;  for  the  benefit  of  the  feudal 
lords  or  the  Church  to  whom  portions  of  the  produce  were 
payable  as  dues  for  personal  service,  fees  for  privileges 
granted,  or  tithes  for  the  poor.  Only  the  superfluity,  after 
these  claims  were  satisfied,  came  forward  for  exchange, 
and  then  only  into  local  markets. 

The  holdings  of  land  and  property  and  tenure  of  posi- 
tion :  whether  held  under  the  beneficiary  system  in  which 
property  considerations  predominated ;  or  under  vassalage, 
which  was  a  purely  personal  relation  between  one  or  more 
individuals  in  the  feudal  chain  and  another  individual;  or 
by  immunity,  which  was  a  political  privilege  granted  for 
some  service  rendered  or  some  quarrel  compromised  — 
each  and  all  of  these  involved  payment  of  dues,  or  services 
in  peace  or  war  to  the  immediate  superior,  through  a  long 
chain  of  infeudation  and  subinfeudation  from  the  king  or 
great  over-lord  downwards;  and  from  the  villein  working 
out  his  enfranchisement,  or  the  poor  peasant  just  able  to 
maintain  his  family,  upwards.  They  were  all  personal 
relations,  although  the  form  which  the  discharge  of  the 
obligations  took  might  be  pecuniary.  The  difi'erences  in 
the  shape  of  these  relations  and  connections,  in  various 


26  THE  ECONOMICS  OF  SOCIALISM 

parts  of  Europe,  were  countless,  but  in  the  main  the  system 
itself  was  the  same.  It  was  in  fact  a  great  rural  hierarchy, 
modified  by  the  growing  power  of  the  towns,  with  their 
increasing  wealth  and  independence  for  the  burgher  class, 
and  by  the  influence  of  a  sacerdotal  hierarchy,  that  of  the 
Catholic  Church. 

The  articles  of  use,  of  beauty,  and  of  luxury  produced  at 
this  period,  even  in  countries  which,  like  our  o\^Tn,  were  at 
the  time  in  many  respects  rude  and  barbarous,  awaken 
our  admiration.  We  have,  in  fact,  only  to  look  round  our 
museums,  or  to  read  the  list  of  the  rich  things  paid  as 
dues  or  given  to  a  prince  or  baron  of  the  day,  to  under- 
stand that  capital  is  in  nowise  necessary  to  the  develop- 
ment of  the  beautiful  in  art.  The  splendour  of  the  ca- 
thedrals alone,  the  ruins  of  the  abbeys  and  monasteries 
which  abound  in  Great  Britain,  are  quite  sufficient  to  tell 
us  that  there  was  no  lack  then  of  architects,  decorators,  and 
builders  of  the  very  highest  skill  in  every  department  of 
their  craft. 

In  the  long  run,  the  free  cultivator  and  free  craftsman, 
the  yeoman  and  the  artisan,  overcame  the  competition  of 
the  serfs,  if  competition  it  could  be  called.  The  serfs  were 
gradually  emancipated  because  their  position  became  first 
economically  unsatisfactory  to  the  community  and  then 
ethically  wrong.  At  length,  therefore,  in  England,  the 
most  advanced  European  country,  cultivation  of  the  land 
and  handicraft  by  freemen  finally  replaced  villenago,  and 
England  of  the  fifteenth  century,  as  has  been  so  often 
pointed  out  of  late  years,  was  essentially  the  country  of  free 
men  —  free  producers  who  commanded  as  individuals  their 
own  means  of  production  and  raw  materials.  If  ever  in- 
dividualism in  its  economic  and  social  sense  could  be  per- 
manently   maintained,    then    was    the    time.     Everybody 


METHODS  OF  PEODUCTIOX  27 

wanted  to  keep  it  up.  The  results  to  the  kingdom  at 
large  were  satisfactory  to  all,  and  even  the  upper  classes, 
with  all  their  arrogance  and  brutality,  were  in  a  sense 
proud  of  the  well-being  and  independence  of  their  work- 
ing countrymen. 

Never  before  or  since  has  man  as  an  individual  had  such 
a  chance.  Controlling  his  own  tools  and  his  own  product, 
selling  his  labour  for  hire  but  seldom  and  at  a  good  rate ; 
in  the  country  master  of  his  holding  and  entitled  to  his 
share  of  the  use  of  the  common  land ;  in  the  town  member 
of  his  guild,  secure  of  his  privileges,  safe  to  rise  from 
journeyman  to  master  craftsman  and  protected  against 
competition  —  the  advantage  of  such  circumstances,  and 
the  real  freedom  and  sturdy  well-being  they  gave  birth  to, 
I  have  often  descanted  upon. 

Local  markets,  in  which  adulteration  was  made  criminal 
and  where  profit-mongering  was  relentlessly  put  down,  were 
supplemented  to  some  extent  by  the  great  national  and 
international  fairs,  at  which  goods  from  all  parts  of  Europe 
and  the  East  were  freely  offered  for  sale  in  exchange  for 
local  products.  A  local  and  national  spirit  of  individual 
initiative  was  thus  engendered,  which  was  vivifying  to  all 
it  touched  then  and  rouses  our  admiration  now.  There 
was  some  pleasure  in  doing  good  work  when  the  craftsman 
himself  was  in  his  way  more  than  half  an  artist,  and  the 
artist  who  was  not  also  a  craftsman  was  unknown. 

The  whole  thing  hung  together.  Individual  production, 
individual  ownership,  individual  exchange.  From  the  first 
step  to  the  last,  the  worker  controlled  his  means  of  pro- 
duction and  controlled  his  product.  There  was  no  prob- 
ability then  that  the  creature  of  his  own  brain,  fashioned 
by  his  own  hands,  would  turn  again  and  rend  him  in 
the  form  of  an  over-produced  commodity.     The  supply  and 


28  THE  ECONOMICS  OF  SOCIALISM 

demand  alike  of  goods  and  of  labour  were  strictly  regu- 
lated: the  object  of  the  restrictions  being  almost  invariably 
to  secure  good  articles  and  good  pay  for  producing  them. 
When  each  man  worked  the  whole  or  the  greater  part  of 
his  time  on  the  land,  or  in  the  town,  under  such  conditions 
as  these;  when  he  was  certain  of  good,  if  rough,  food  and 
good  clothing  from  year's  end  to  year's  end;  when  educa- 
tion was  far  more  general  and  better  than  has  been  com- 
monly supposed;  and  when  wage-earning  was  the  excep- 
tion rather  than  the  rule  —  when  all  this  was  the  birth- 
right of  the  working-class,  there  is  little  need  to  -marvel 
that  they  did  not  welcome  a  change  of  system  with  any 
great  alacrity,  so  far  as  they  could  understand  what  was 
coming  about. 

But  this  happy  period  of  national  isolation  and  full 
bellies  could  not  continue.  It  was  impossible  to  round  up 
England  from  the  onward  movement  of  human  kind  at 
large. 

Once  more  economic  development  recked  little  of  the 
human  happiness  of  the  moment:  once  more  mankind 
moved  unconsciously  onward  towards  the  completion  of  the 
full  and  orbicular  cycle  marked  out  for  the  evolution  of 
the  race. 

Of  the  expropriation  of  the  freeholders  long  since  ac- 
complished in  Great  Britain  and  now  going  on  all  over 
Europe;  of  the  downfall  of  the  old  feudal  nobility  and 
the  confiscation  of  Church  property;  of  the  cruel  vagrancy 
laws,  and  enactments  against  working-class  combinations; 
of  the  conversion  of  the  democratic  guilds  into  close  capital- 
ist corporations  —  of  these  and  other  events  which  ushered 
in  the  modem  capitalist  system  I  need  not  here  speak  at 
length.  A  whole  library  of  works  treating  of  these  matters 
has  been  placed  at  the  disposal  of  the  English  public  since 


METHODS  OF  PEODUCTION  29 

my  little  "  England  For  All  "  first  set  the  work  on  foot  just 
forty  years  ago.  And  now,  in  any  city  of  the  English- 
speaking  peoples,  a  student  can,  with  little  difficulty,  and 
with  a  comparatively  small  expenditure  of  time  or  money, 
master  all  that  he  needs  to  know  concerning  the  growth  of 
the  wage-earning  class.  The  facts  are  there,  I  say,  but 
they  are  not,  unfortunately,  by  any  means  always  rightly 
interpreted. 

Individual  production  for  immediate  use  gradually  gave 
way  to  social  production  for  private  profit.  How  it  came 
about  that  large  numbers  of  free  men  found  themselves, 
in  this  country  first,  and  afterwards  in  other  countries, 
deprived  of  land,  destitute  of  means  of  production,  and 
possessed  only  of  the  sole  right  to  sell  the  power  of  labour 
in  their  bodies  to  those  who  possessed  land  and  means  of 
production,  is  a  chapter  in  economic  and  social  history 
extending  from  the  reign  of  Henry  VII  to  that  of  James 
I;  and  again  from  the  beginning  of  the  eighteenth  to  the 
first  quarter  of  the  nineteenth  century.  Never  in  history 
before  was  so  great  and  crucial  a  change  in  the  relations  of 
production  so  rapidly  brought  about.  The  development 
may  be  said  to  divide  itself,  as  stated,  into  two  periods. 
In  the  first  period  production  for  exchange  was  gradu- 
ally substituted  for  individual  production  mainly  for 
use. 

This  change  was  accompanied  by  a  similarly  gradual 
growth  of  the  purely  wage-earning  class,  by  the  expansion 
of  commerce  and  trade,  and  the  replacement  of  the  local 
market,  first  by  the  national,  and  then  by  the  international 
and  world-wide  market. 

The  second  period  is  essentially  the  age  of  machinery ;  in 
which,  that  is  to  say,  steam  and  improved  mechanical  and 
chemical  processes  dominate  the  whole  industrial  system. 


30  THE  ECONOMICS  OF  SOCIALISM 

In  the  first  stage,  the  producer  becomes  accustomed  to 
regard  himself  as  a  wage-earner  for  life.  In  the  second 
stage,  he  becomes  accustomed  to  look  upon  himself  not 
only  as  a  wage-earner  for  life  but  as  an  appendage  to  the 
great  machines  of  production  and  distribution  around  him. 
In  the  earlier  time  spoken  of,  he  might  still,  though  a 
wage-earner,  use  his  machine  when  at  work,  and  remain 
still  to  some  extent  an  independent  man.  In  the  later 
period,  he  becomes,  and  must  become,  more  and  more  the 
mere  slave  of  the  mechanism  of  industry,  which  his  fellows 
have  fashioned  and  which  he,  conjointly  with  them,  might 
use  and  dominate. 

The  crucial  change  which  lies  at  the  bottom  of  the  entire 
transformation  is  that  from  individual  to  social  production, 
unaccompanied  by  the  modification  of  individual  into  social 
exchange  and  appropriation  of  the  product. 

That  may  seem  too  abstract  a  statement.  The  worker 
of  the  fifteenth  century  in  England  had,  as  we  have  seen, 
a  complete  control  over  his  tools,  his  raw  materials  and 
his  finished  product;  or,  if  a  peasant  farmer,  he  owned  his 
own  land,  lived  off  his  own  cereals  and  fruit  and  live  stock 
and  clothed  himself  to  a  great  extent  with  his  own  wool. 
In  the  case  of  the  handicraftsman,  whether  saddler,  smith, 
jeweller,  tailor,  or  the  like,  he  produced  with  a  view  to 
the  local  market,  and  probably  owned  land  as  well.  Such 
a  man  was  his  own  master  as  an  individual,  and  even  tlie 
stonemason,  though  more  continuously  a  wage-earner,  came 
into  the  same  category  in  the  main.  When,  however,  a 
number  of  workers  began  *to  work  under  the  control  of 
a  master  permanently  for  wages,  the  raw  material,  the 
finished  product,  and  the  place  in  which  they  worked 
all  belonging  to  the  master  —  who  produced  the  articles 
not  primarily  for  use  but  for  exchange  in  order  to  make  a 


METHODS  OF  PEODUCTION  31 

profit  —  then,  manifestly,  the  entire  basis  of  the  system 
was  transformed. 

No  longer  was  it  merely  the  superfluity  but  the  whole 
production  which  went  into  exchange.  No  longer  did  the 
individual  worker  work  as  an  individual,  he  worked  as  a 
portion  of  a  complete  social  organism  for  a  social  purpose, 
namely,  exchange.  No  longer  did  the  product  belong  to 
him  either  wholly  or  in  part;  it  belonged  to  his  employer 
and  to  him  alone,  and  the  wage-earner  had  no  say  what- 
ever as  to  its  method  of  production  or  as  to  its  disposal. 
No  longer  also  did  the  worker  work  only  incidentally  as  a 
wage-earner:  he  toiled  continuously  as  a  wage-earner,  and 
as  a  wage-earner  only,  all  his  life  through. 

Here,  then,  we  have  the  great,  fundamental  antagonism 
of  our  present  system  of  capitalist  production,  which 
emerged  from  the  old  individual  production  of  freemen. 
It  is  the  antagonism  which  lies  at  the  root  of  all  the  other 
antagonisms : 

Social  production  over  against  individual  appropriation  -¥t: 
and  exchange. 

Thenceforward  from  that  point  the  rest  of  the  develop- 
ment and  its  class  relations  are  comparatively  easy  to 
understand.  In  spite  of  certain  local  survivals  of  the  old 
system,  such  as  peasant  proprietors  and  skilled  craftsmen 
in  certain  parts  of  Europe  and  in  certain  trades:  in  spite 
of  new  developments  such  as  the  farmers  of  Western  Amer- 
ica, and  the  fruit  and  vineyard  proprietors  of  Australia, 
the  tendency  is  all  in  the  same  direction. 

The  production  for  the  local  market  fades  into  produc- 
tion for  the  national  and  world  market. 

All  the  old  middle-age  restrictions  are  swept  away  and 
even  modern  protection  becomes  very  different  from  its 
middle-age  correlative. 


32  THE  ECONOMICS  OF  SOCIALISM 

Production  for  profit  becomes  the  rule:  production  for 
use  the  exception. 

The  workers  instead  of  being  wage-earners  at  intervals 
become  wage-earners  for  life. 

Exchange  and  the  pecuniary  relations  which  grow  out  of 
exchange  dominate  and  control  the  whole  of  society. 

All  the  old  class  antagonisms  fade  by  degrees  into  the 
last  and  final  antagonism,  between  wage-earners  and  owners 
of  the  means  of  production  and  distribution.^ 

We  are  landed,  in  short,  in  that  great  maelstrom  of 
capitalist  production  with  its  whirl  of  commodities  and  its 
series  of  economic  antagonisms  which  it  is  the  object  of 
this  book  to  endeavour  to  examine  and  simplify.  This  de- 
velopment has  been  almost  infinitely  more  rapid  than  any 
of  its  precursors.  Capitalism  in  its  present  form  is  barely 
180  years  old;  and  yet,  as  said  at  the  commencement  of 
this  chapter,  it  is  even  now  obviously  in  its  last  period. 
Nay,  more,  the  transformation  to  the  new  and  final  stage 
of  human  power  over  nature  has  already  begun. 

What  has  pushed  mankind  on  thus  rapidly?  What  has 
so  greatly  accelerated  the  rate  of  progress  beyond  that  of 
all  former  ages?  Unquestionably  the  growth  of  the  great 
machine-industry  motived  by  steam,  oil  and  electricity. 
From  t'lo  middle  of  the  eighteenth  century  the  human  race 
fell  into  the  grip  of  its  own  tremendous  mechanical  con- 
trivances, which,  though  many  of  them  had  been  discovered 
before,  then  first  became  applicable  to  the  needs  of  society. 
But  they  were  not  handled  hy  society.  They  were,  they 
are,  and  for  a  time  still  will  be  handled  by  the  possessing 
class  against  society.  Once  more  the  cruelty  of  economic 
progress  makes  itself  felt.     The  great  machine  industry 

i  Those  who  desire  to  follow  the  subject  furtlier  may  consult 
my  "Evolution  of  Revolution."  (Grant  Richards,  London.  Boni 
&  Liveright,  New  York.) 


METHODS  OF  PEODUCTION  33 

which  might  have  lessened  labour  and  rendered  toil  un- 
known, which  provides  mankind  with  the  means  of  doing, 
what  Aristotle  foresaid  might  thus  be  possible  —  the  final 
abolition  of  slavery  in  every  form  —  this  great  machine 
industry  dominating  instead  of  being  dominated,  has 
crushed  individuality,  broken  up  family  life,  rendered  ex- 
istence more  uncertain  than  ever  before,  and  filled  our 
cities  with  huge  hordes  of  propertyless  proletarians;  at  the 
same  time  that  it  has  denuded  the  country  districts  of  their 
population  and  has  rendered  London  and  England  more 
dependent  on  foreign  sources  for  food  supply  than  ever  was 
Eome. 

All  wealth  is  due  to  labour  applied  to  natural  objects. 
This  is  an  obvious  truth,  when  labour  is  engaged  in  creating 
wealth  under  communism,  under  slavery,  under  serfdom,  or 
when  individual  free  farmers  are  producing  food,  or  materi- 
als for  clothing,  or  cattle  or  a  superfluity  of  hides,  milk, 
cheese,  &c.,  for  exchange.  There  can  be  no  doubt  whatever 
in  these  cases  as  to  what  is  the  agency  by  which  the  various 
useful  articles  are  produced.  Nor,  when  exchange  is  con- 
ducted by  barter,  does  any  dispute  arise  upon  this  point. 
What  is  the  actual  measure  of  value  between  two  articles 
which  are  exchanged,  under  these  conditions  of  barter,  is 
never  considered.  Supply  and  demand,  in  the  shape  of  tha 
higgling  between  the  buyers  and  sellers,  determine  each 
several  transaction,  whether  it  be  between  communist 
tribes  or  between  Carthaginian  merchants  and  West  Afri- 
can savages,  trading  away  their  gold  dust  for  goods. 

Even  under  the  capitalist  system  of  production  for  ex- 
change and  profit,  nobody  would  be  so  foolish  as  to  con- 
tend that  wealth  could  be  obtained,  in  the  first  instance, 
without  labour;  for  if  none  laboured  there  would  be  no 
wealth  at  all  and  man  would  speedily  perish.     Only  the 


34  THE  ECONOMICS  OF  SOCIALISM 

fact  that,  without  slavery  or  serfdom,  or  any  apparent 
compulsion,  one  class  is  in  possession  of  all  the  social 
means  of  production  and  distribution,  inherited  from  past 
generations  and  now  constantly  improved  from  decade  to 
decade  by  social  discovery  and  invention,  and  another  class 
owns  nothing  but  the  labour  power  in  the  bodies  of  its 
members,  which  those  propertyless  persons  are  obliged  to 
sell  as  a  commodity  to  the  possessors  of  capital  in  order 
merely  to  live  —  only  these  facts  introduce  a  complexity 
into  the  problem  which  enables  the  capitalists  and  their 
professors  of  political  economy  to  confuse  the  whole  issue, 
under  this  modern  form  of  the  production  of  wealth. 

Even  to-day,  also,  the  majority  of  any  nation  has  little 
knowledge  of  its  own  surroundings.  The  workers  of  Great 
Britain  as  a  whole  do  not  recognise  nearly  to  the  extent 
their  Chartist  forbears  did,  how  completely  the  wage-sys- 
tem holds  them  in  thrall,  they  are  unaware  that,  so  long 
as  this  system  continues,  their  emancipation,  either  as 
individuals  or  as  a  community,  is  impossible;  and  they 
almost  resent  the  statement  that  the  ownership  of  all  the 
great  means  and  instruments  of  making  wealth,  by  a 
small  minority  of  the  population  over  against  them,  in- 
volves them  in  a  class  war  whether  they  like  it  or  not. 
Yet  capitalism  in  its  modern  form  is  so  recent,  and  was 
so  fiercely  resisted  in  this  island,  in  its  development  to 
its  full  power  less  than  a  hundred  years  ago,  that  such 
forgetfulness  of  its  origin  is  a  remarkable  instance  of 
human  oblivion. 

How  different  this  capitalism  is  from  any  of  the  ancient 
methods  of  production  is  at  once  apparent  when  historically 
and  economically  considered.  Moreover  the  illustration 
of  its  growth  is  far  clearer  in  Great  Britain  than  in  any 
other  country  in  the  world.     Not  only  did  the  entire  trans- 


METHODS  OF  PRODUCTION  35 

formation  of  industry  and  transport  by  land  and  sea,  ow- 
ing to  steam,  great  factories,  railways,  &c.,  begin  in  that 
island,  but  the  expansion  of  the  proletariat  —  the  indigent 
population  deprived  of  all  property,  even  in  the  shape  of 
small  land-ownership  —  assumed  far  larger  proportions  in 
Great  Britain  than  anywhere  else.  In  fact,  the  small  land- 
owning and  small  handicraft  sections  almost  entirely  dis- 
appeared. This  is  why  the  examples  of  the  domination 
of  capital  in  the  modern  evolution  of  production  are  chiefly 
drawn  from  England,  though  other  nations  have  advanced 
farther  than  the  English  employers  in  several  departments 
of  industry.  There  is  no  peasant  proprietary  in  Great 
Britain  as  in  France,  Germany,  Italy,  Belgium,  Russia  and 
other  European  countries,  to  act  as  a  conservative,  or  re- 
actionary, element  in  opposition  to  the  revolutionary  ten- 
dencies of  the  workers  of  the  towns  when  these  latter  be- 
come conscious  of  their  true  class  interests. 

There  is,  in  short,  no  antagonism  between  the  toilers 
of  the  country  and  the  city  here  as  there  is  elsewhere. 
They  can  brigade  themselves  together  on  one  common  basis, 
in  order  to  proceed,  either  peaceably  or  forcibly,  to  the 
next  stage  in  the  evolution  of  the  race:  and  this  stage, 
as  already  stated,  must  inevitably  be  a  reversion  to  collec- 
tivism, communism  and  socialism,  on  an  infinitely  higher 
plane  than  the  primitive  barbarian  communism  under 
which  our  remote  ancestors  laid  the  foundations  of  man's 
rapidly  advancing  control  over  the  forces  of  nature.  Nor 
should  the  truth  be  overlooked  that  the  change  in  the  forms 
of  production,  distribution,  exchange,  and  communication 
has  been  far  greater  in  the  last  hundred  and  seventy  years 
than  in  all  the  previous  history  of  man  on  the  planet ;  that 
this  modification  is  proceeding  even  now  at  a  cumulative 
rate;  and  that  it  is  possible  for  human  beings  in  society, 


36  THE  ECONOMICS  OF  SOCIALISM 

through  education,  combination  and  mutual  intercourse, 
to  far  transcend  in  the  rapidity  of  their  economic  and  social 
development  any  previous  period  kno^\^l  to  man. 

At  the  close  of  even  such  a  brief  and  cursory  survey 
of  the  methods  of  production  as  this,  it  is  impossible  not 
to  be  struck  with  the  wholly  unconscious  and  helpless 
manner  in  which  mankind  has  drifted,  rather  than  pro- 
gressed, from  one  stage  to  another.  From  communism 
into  chattel-slavery  and  private  property  the  development 
was  wholly  unconscious :  the  resistance  to  and  the  ac- 
ceptance of  the  new  forms  were  equally  actuated  by 
ignorance  and  ignorance  alone.  The  ablest  brains  of  the 
time  could  but  bring  to  bear  immediate,  transitory,  and 
so-called  practical,  remedies  for  the  pressing  needs  which 
threatened  to  subvert  the  entire  community.  None  could 
comprehend  what  was  going  on  around  them :  not  a  single 
man  of  genius  could  formulate  the  process  of  change 
through  which  his  society  was  passing. 

So  it  was  all  through  the  long,  long  centuries  during 
wliich  chattel-slavery,  and  the  forces  of  production  that  it 
called  forth  and  created,  dominated  man  in  civilisation. 
Great  administrators  and  able  thinkers  as  the  Eomans  and 
the  Roman  Empire  produced,  they  and  their  jurists  were 
too  practical,  too  much  bent  on  solving  obvious  problems 
as  they  arose,  to  recognise  the  existence  of  the  still  greater 
problem  which  was  solving  itself  around  them. 

When  chattel-slavery  came  to  an  end,  and  villenage  and 
feudalism  were  substituted,  still  the  same  blind,  unconscious 
and  unregulated  force  of  human  development  worked  its 
way  on.  The  ablest  and  most  farseeing  men  of  the  whole 
of  the  great  time  of  art,  eloquence,  conquest,  and  discovery 
failed  to  perceive  whither  they  were  going,  and  were  swept 
hither  and  thither  on  the  current  of  the  stream  which  bore 


METHODS  OF  PEODUCTION  37 

them  they  knew  not  to  what  shore.  If  here  and  there  a 
dreamer  arose  who  saw  in  his  visions  dimly  into  the 
future,  he  himself  felt  that  he  was  but  a  dreamer  and 
that,  when  his  body  returned  to  earth,  his  waking  sensa- 
tions would  be  no  more  capable  of  impelling  him  to  con- 
scious action,  or  of  inducing  others  to  follow  him,  than 
they  were  before  he  was  rapt  up  into  the  Seventh  Heaven 
of  the  seer. 

So  again  was  it  when  serfdom  disappeared  and  individ- 
ual freedom  reached  the  highest  point  to  which  individ- 
ualism, unsocialised,  can  attain.  Still  unconsciously,  still 
blindly,  still  ignorantly,  groping  like  children  in  a  darkened 
room,  did  mankind  drift  from  that  sturdy  individualism 
into  the  Malebolge  of  capitalism  with  its  inevitable  but  fear- 
ful cruelty  to  the  weakest  and  most  sensitive  of  the  race. 
Like  the  Nemesis  of  the  ancients  the  wheel  of  economic 
progress  rolls  on,  crushing  the  noblest  and  the  worst  indif- 
ferently in  its  course. 

Men  of  our  epoch  are  the  inheritors  of  the  lessons  of  all 
the  ages.  The  long  martyrdom  of  mankind  to  the  forms 
of  production  and  exchange  has  enabled  us  to  proceed  con- 
sciously and  deliberately  where  our  ancestors  could  but 
move  unconsciously  and  anarchically.  Thanks  to  their 
sufferings,  we  can  see  where  they  could  not. 


O/^  ,'7  ^'<r 


CHAPTER  II 

VALUE 

The  thorough  knowledge  and  understanding  of  what 
the  word  "  value  "  means  is  essential  to  any  fruitful  exam- 
ination of  the  capitalist  system  of  production.  This  is 
admitted  by  economists  of  every  school,  though  many  of 
them  at  once  go  on  to  render  any  true  conception  of  value 
impossible. 

To  begin  any  analysis,  however,  it  is  first  necessary  to 
grasp  what  wealth  is.  It  assuredly  is  not,  as  Aristotle 
says  it  is,  only  that  which  is  interchangeable;  for  a  society 
may  be,  as  we  have  seen,  very  wealthy  in  proportion  to  its 
needs,  into  whose  midst  the  idea,  still  less  the  practice,  of 
exchange  has  never  come.  Eobinson  Crusoe,  the  favourite 
example  of  the  individualist,  was  at  the  end  of  a  few 
years'  work  on  his  island  a  wealthy  man  in  his  way ;  though 
in  his  case,  notwithstanding  the  fact  that  he  possesses  the 
tools  and  weapons  of  civilisation,  the  very  possibility  of 
exchange  had  entirely  ceased.  An  individual,  or  a  society, 
which  has  an  abundant  supply  of  all  the  things  needed  for 
existence,  enjoyment  and  luxury,  according  to  the  ideas 
of  the  time,  and  the  power  to  keep  up  this  supply  at  the 
same  or  a  higher  level,  is  wealthy;  and  the  ownership  of 
such  a  supply  constitutes  the  possessor,  in  any  ordinary 
sense  of  the  words,  a  person  of  wealth.  Wealth,  therefore, 
primarily  consists  in  an  accumulation  of  goods,  houses, 
clothes,  beautiful  objects,  boats,  food  and  so  on  which 
together  give  enjoyment  to  those  who  own  and  can  use 

38 


VALUE  39 

them.    This   whether  they  can  be  exchanged  for  other 
articles  or  not. 

Nothing  has  tended  more  to  confuse  the  mind  of  the 
student  of  political  economy  at  the  start  than  the  statement, 
which  we  owe  to  the  great  father  of  science  himself,  that 
there  are  two  sorts  of  economic  value :  value  in  use,  or  use- 
value;  and  value  in  exchange,  or  exchange-value.  If  any- 
thing is  useful  to  us  it  is  no  doubt  valuable  to  us.  We 
don't  want  to  give  it  up,  unless  more  of  it  is  easy  to  get: 
we  wish  to  derive  the  full  benefit  from  it.  But  it  would 
be  equally  useful  if  there  were  an  endless  supply  of  it, 
and  all  the  world  could  take  as  much  as  each  needed.  In 
that  case  there  would  be  no  contest  whatever  about  indi- 
divual  possession,  though  the  need  of  a  constant  supply 
might  be  as  great  as  ever. 

Value  in  the  economic  sense,  therefore,  only  appears 
^lien,^n  addition  to  usefulness,  relations  of  exchange ' 
between  articles  of  social  use  are  esJablisTied.  Thus  we 
know  that  air,  water,  light  are  of  enormous  value,  in  the 
sense  that  we  cannot  live  without  them.  But  they  a];e_sp 
plentiful,  as  a  rule,  that  they  have  no  value  in  the  economic 
sense;  that  is  to  say,  they  will  fetch  nothing  in  exchange 
for  other  things.  But  in  the  desert,  in  a  prison,  or  on 
board  a  boat  from  a  wrecked  vessel,  men  have  been  known 
to  offer  all  the  wealth  they  had  at  command  for  a  little 
water.  In  these  exceptional  instances,  as  in  the  case  of  a 
besieged  city,  the  value  both  in  use  and  in  exchange  of 
that  which,  in  other  conditions,  is  practically  valueless  be- 
comes almost  infinite. 

But  we  have  not  to  do  here  with  such  exceptional  cases, 
any  more  than  with  the  value  of  food  in  a  famine.  The 
object  in  view  is  to  arrive  at  what  constitutes  the  value  of 
useful  things  on  the  average  when  they  are  exchanged  in 


40  THE  ECONOMICS  OF  SOCIALISM 

a  general  free  market.  Aristotle,  who  saw  and  foresaw  so 
much,  understood  that  exchange  under  such  conditions 
must  be  an  exchange  of  equivalents  —  of  things  of  equal 
value ;  though  slavery  disguised  from  him  what  formed  the 
basis  of  this  equality  of  exchange.  No  matter  how  unlike 
the  things  may  be  which  are  exchanged,  coats  and  bread, 
hats  and  iron,  the  equality  of  their  value,  in  certain 
quantities  relatively  to  one  another,  is  established  on  the 
average  by  their  exchange,  and  this  equality  is  arrived  at 
by  competition  and  the  higgling  of  the  market. 

Now,  in  modern  capitalist  societies  nearly  everything 
which  is  raised,  produced,  or  made,  is  so  with  a  view  not 
to  its  use  by  those  who  create  it,  or  their  immediate  neigh- 
bours, but  for  the  purpose  of  exchange  in  the  open  market. 
These  goods  thus  produced_Jor  exchange  are  called  in 
economhr4attgTrage^mmodities,  of ^wares  —  useful  articles 
primarily  intended  for  exchange  and  sale.  The  workers 
and  their  employers  alike  look  to  the  general  market  as  they 
produce  cups  and  saucers,  pots  and  pans,  clothes  and 
furniture,  gold  and  diamonds.  And  the  wealth  of  our 
present  society,  by  common  consent,  consists-in-a^ast  ac- 
cumulation of  these  commodities  or  wares,  which  all  have 
an  exchange  value. 

Now,  how  are  these  commodities  exchanged  under  the 
conditions  spoken  of?     What  is  it  which  regulates  their 
value,_  their  relative  value,  when  exchanged  against  one 
'  another? 

It  is  remarkable  that  nearly  all  economists  of  note  are 

/  agreed  as  to ^whjrLconst itutes  value.     They  say,  with  one 

/    accord,   that  ._quantity_  oOabour   constitutes  ..value ;   the 

/      amount  of  human  labour,  that  is  to  say,  which  it  costs  to 

/       produce  the  commodities  or  wares  which  are  exchanged 

against  one  another. 


VALUE  41 

Of  late  years,  it  is  true,  there  has  arisen  a  school  —  if 
school  it  can  be  called,  in  which  mere  word-spinning  is 
reduced  to  a  system  —  which  holds  that  "  utility,"  or  even 
"  desire  "  alone,  constitutes  exchange  value.  I  shall  deal 
with  this  strange  aberration  separately.  Meanwhile,  the 
following  extracts  give  the  opinions  of  those  who  are  still 
reckoned  the  greatest  English  economists : 

Thus,  Sir  William  Petty  says,  speaking  of  exchange 
value  with  reference  to  corn : 

"  How  much  English  money  is  this  com  or  rent  worth  ? 
I  answer,  so  much  as  the  money  which  another  single 
man  can  save  within  the  same  time  over  and  above  his 
expenses  if  he  applied  himself  wholly  to  produce  and  make 
it;  viz..  Let  another  man  so  travel  into  a  country  where  is 
silver,  there  dig  it,  refine  it,  bring  it  to  the  same  place 
where  the  other  man  planted,  his  corn,  coin  it,  &c.,  the  same 
person  all  the  while  of  his  working  for  silver  gathering 
also  food  for  his  necessary  livelihood  and  procuring  him- 
self covering,  &c.  I  say  the  silver  of  the  one  must  be 
esteemed  of  equal  value  with  the  corn  of  the  other ;  the  one 
being  perhaps  twenty  ounces  and  the  other  twenty  bushels. 
From  whence  it  follows  that  the  price  of  a  bushel  of  this 
corn  to  be  an  ounce  of  silver.  If  a  man  can  bring  to 
London  an  ounce  of  silver  out  of  the  earth  in  Peru  in  the 
same  time  that  he  can  produce  a  bushel  of  corn,  then  one 
is  the  natural  price  of  the  other ;  now,  if  by  reason  of  new 
and  more  easy  mines  a  man  can  get  two  ounces  of  silver 
as  easily  as  formerly  he  did  one,  then  corn  will  be  as 
cheap  at  ten  shillings  a  bushel  as  it  was  before  at  five 
shillings  a  bushel,  caeteris  paribus." 

Petty  confines  himself  here  to -value^-iB-exehftBge— a&- — 
observed  in  the  society  of  his  own  day.     But  by  treating 
the  subject  solely  from  the  individual  point  of  view  as 


42  THE  ECONOMICS  OF  SOCIALISM 

depending  upon  the  labour  of  "  another  man,"  "  a  man  " 
and  so  forth,  he  confuses  the  general  issue.  Also,  he  omits 
the  element  of  the  relative  wealth,  or  ease  of  accessibility, 
of  the  silver  ore,  in  the  mine  from  which  the  ounce  of 
silver  is  obtained,  which  still  further  affects  the  question  of 
individual  exchange.  But  he  does  not  go  back  to  anterior 
conditions  of  society,  in  which  exchange  as  an  important 
factor  was  wholly  unknown,  for  the  purpose  of  justifying 
the  labour  basis  of  value.  This  was  left  to  his  successors 
generations  after  his  death.  They  use  the  hunters  and 
fishers  of  primitive  times  as  reasoning  as  to  the  value  in 
exchange  of  their  chase  or  their  catch  being  reckoned  upon 
the  amount  of  labour  it  had  cost  them  to  procure  their 
game  or  fish,  regardless  of  the  truth  that  the  hunters  and 
fishers  of  this  or  that  tribe  of  savages  had  not  and  could  not 
have  such  a  conception  in  their  minds  as  exchange,  either 
upon  that  basis  or  in  any  other  recognised  form.  Nothing 
can  be  more  misleading  than  this  when  we  consider  value 
in  exchange  under  social  and  economic  conditions  where 
exchange  has  become  the  principal  motive  for  production  in 
every  department  of  human  industry.  But  the  argument 
that  labour  constitutes  the  main  constituent  of  value  in 
exchange  is  overwhelming  even  when  imperfectly  put. 
Adam  Smith's  well-known  passage  is  almost  too  trite  to 

"The  real  price  of  everything,  what  everything  really 
costs  to  the  man  who  wants  to  acquire  it,  is  the  toil  and 
trouble  of  acquiring  it.  What  everything  is  really  worth 
to  the  man  who  has  acquired  it,  and  who  wants  to  dispose 
of  it  or  exchange  it  for  something  else,  is  the  toil  and 
trouble  which  it  can  impose  on  other  people.  Labour  was 
the  first  price  —  the  original  purchase-money  that  was 
paid  for  all  things.     In  that  early  and  rude  state  which 


VALUE  43 

precedes  both  the  accumulation  of  stock  and  the  appropria- 
tion of  land,  the  proportion  between  the  quantities  of  labour 
necessary  for  acquiring  different  objects  seems  to  be  the 
only  circumstance  which  can  afford  any  rule  for  exchang- 
ing them  for  one  another.  If  among  a  nation  of  hunters, 
for  example,  it  usually  costs  twice  the  labour  to  kill  a 
beaver  which  it  does  to  kill  a  deer,  one  beaver  would  natu- 
rally be  worth  or  exchange  for  two  deer.  It  is  natural 
that  what  is  usually  the  produce  of  two  days'  or  two  hours' 
labour  should  be  worth  double  of  what  is  usually  the  pro- 
duce of  one  day's  or  one  hour's  labour." 

And  Adam  Smith  then  elaborates  this  same  proposition 
at  greater  length. 

Benjamin  Franklin  estimates  the  value  of  everything 
by  labour,  general  labour,  and  regards  labour  as  the  sub- 
stance of  value  throughout.  He  says :  "  Trade  in  general 
being  nothing  but  the  exchange  of  labour  for  labour,  the 
value  of  all  things  is  most  justly  measured  by  labour." 

Ricardo  having  adopted  and  confirmed  Adam  Smith's 
view  as  to  the  basis  of  value  in  exchange  being  cost  of 
production  as  measured  by  labour  for  the  original  hunter 
and  fisher,  into  whose  brain  the  very  idea  of  exchange  had 
never   yet  come,   proceeds : 

"  That  this  is  really  the  foundation  of  the  exchangeable 
value  of  all  things,  excepting  those  which  cannot  be  in- 
creased by  human  industry,  is  a  doctrine  of  the  utmost 
importance  in  political  economy.  If  the  quantity  of  labour 
realised  in  commodities  regulate  their  exchangeable  value, 
every  increase  of  the  quantity  of  labour  must  increase  the 
value  of  the  commodity  on  which  it  is  exercised  as  every 
diminution  must  lower  it. 

"  To  convince  ourselves  that  this  is  the  real  foundation 
of  exchangeable  value,  let  us  suppose  any  improvement  to 


U  THE  ECONOMICS  OF  SOCIALISM 

be  made  in  the  means  of  abridging  labour  in  any  one  of 
the  various  processes  through  which  the  raw  cotton  must 
pass  before  the  manufactured  stockings  come  to  the  market 
to  be  exchanged  for  other  things;  and  observe  the  effects 
which  will  follow.  If  fewer  men  were  required  to  culti- 
vate the  raw  cotton,  or  if  fewer  sailors  were  employed  in 
navigating,  or  shipwrights  in  constructing,  the  ships  in 
which  it  was  conveyed  to  us;  if  fewer  hands  were  employed 
in  raising  the  buildings  and  machinery,  or  if  these,  when 
raised,  were  rendered  more  efficient;  the  stockings  would 
inevitably  faU  in  value,  and  command  less  of  other  things. 
They  would  fall  because  a  less  quantity  of  labour  was 
necessary  to  their  production  and  would  therefore  exchange 
for  a  smaller  quantity  of  those  things  in  which  no  such 
abridgment  of  labour  had  been  made. 

"  Economy  in  the  use  of  labour  never  fails  to  reduce  the 
relative  value  of  a  commodity,  whether  the  saving  be  in 
the  labour  necessary  to  the  manufacture  of  the  commodity 
itself,  or  in  that  necessary  to  the  formation  of  the  cap- 
ital, by  the  aid  of  which  it  is  produced.  In  either  case 
the  price  of  stockings  would  fall,  whether  there  were  fewer 
men  employed  as  bleachers,  spinners,  and  weavers,  per- 
sons immediately  necessary  to  their  manufacture;  or  as 
sailors,  carriers,  engineers,  and  smiths,  persons  more  in- 
directly concerned.  In  the  one  case,  the  whole  saving  of 
labour  was  wholly  confined  to  the  stockings ;  in  the  other,  a 
portion  only  would  fall  on  the  stockings,  the  remainder 
being  applied  to  all  those  other  commodities,  to  the  pro- 
duction of  which  the  buildings,  machinery,  and  carriage, 
were  subservient." 

John  Stuart  Mill  also,  although  with  his  inveterate 
eclecticism  he  so  contrives  that,  on  this  point  of  value, 
one  page  should  carefully  contradict  another,  states  in  so 


VALUE  45 

many  words  with  respect  to  "  the  component  elements  of 
the  cost  of  production  "  that  "  the  principal  of  them,  and 
so  much  the  principal  as  nearly  the  sole,  we  found  to  be 
labour." 

It  would  be  easy  to  extend  these  extracts  by  drawing 
upon  other  English  and  foreign  writers  of  note  on  political 
economy. 

Every  one  of  these  quotations  shows  that  all  these 
thinkers  took  labour,  quantity  of  human  labour,  as  the 
basis  and  measure  of  the  value  of  commodities  when  ex- 
changed against  one  another.  But  they  do  not  sufficiently 
distinguish  what  labour.  They  all  speak  of  the  labour  as 
practically  the  labour  of  this  or  that  individual,  or  set  of 
individuals.     There  they  stop. 

But  it  is  precisely  at  this  point  that  the  main  difficulty 
of  the  analysis  begins,  and  the  great  service  which  Marx 
rendered  to  economic  science,  when  he  published  his  first 
volume  of  the  "  Capital,"  more  than  fifty  years  ago,  be- 
comes apparent  so  soon  as  we  fully  comprehend  what  that 
difficulty  was. 

Commodities,  or  wares,  when  produced  or  exchanged,  are 
necessarily  useful,  in  the  social  conditions  of  the  time,  or 
they  would  not  be  exchanged.  There  are  many  things 
which  are  reckoned  useful,  socially  useful,  to-day  which, 
under  other  conditions  of  human  life,  would  be  considered 
useless,  or  even  harmful,  and  would  not  enter  into  ex- 
change at  all.  Bad  gin,  heavily-boned  stays,  tall  hats, 
"  bosh  "  butter  are  commodities,  and  possess  utility  nowa- 
days, but  possessed  utility  at  no  other  period.  Such  social 
utility  is,  I  say,  invariably  assumed  in  all  commodities 
which  enter  into  the  market  for  exchange. 

When  everything  which  marks  the  quality  of  things,  the 
difference    or    similarity    between    two    commodities    ex- 


46  THE  ECONOMICS  OF  SOCIALISM 

changed,  is  removed ;  when  hardness,  softness,  colour,  shape, 
weight,  size,  &c.,  as  well  as  social  utility,  are  abstracted, 
they  have  still  sometliing  left.  A  cheap  suit  of  clothes 
and  a  quarter  of  wheat  are  about  as  different  commodities 
as  it  is  possible  to  imagine;  yet  at  the  time  of  writing 
(1921)  they  exchange,  roughly,  upon  an  equality  on  the 
London  market.  What,  then,  have  the  two  wares  in 
common  ?  Precisely  that,  and  that  alone,  which  appears  in 
other  similar  cases.  /  They  are  both  the  products  of  human 
labour.  This  circumstance,  therefore,  it  is  which  enables 
them  to  be  reduced  to  a  common  term,  to  be  placed  on  a 
quantitative  basis,  and  compared  with  one  another. 
Human  labour  applied  to  their  production  and  embodied  in 
them  is  the  basis  and  measure  of  the  relation  and  exchange 
of  these  two,  and  other  similar  and  dissimilar  commodities. 

But  again  comes  the  question :  what  labour  ? 

Here  we  have  to  enter  upon  a  somewhat  abstract  investi- 
gation, and  the  mind  of  the  ordinary  Englishman  in- 
stinctively shrinks  from  abstract  disquisitions  of  any  kind 
whatsoever.  He  wants  something  concrete,  tangible, 
practical!  It  is  useless  to  tell  him  that  abstract  inquiry 
lies  at  the  bottom  of  nearly  all  the  practical  work  done  in 
the  world:  useless  to  point  out  that  but  for  the  abstract 
investigations  of  the  old  geometers  into  the  properties  of 
conic  sections  and  the  like,  the  art  of  navigation  could  never 
have  attained  anything  approaching  to  its  present  stage 
of  development:  quite  beside  the  mark  to  urge  upon  him 
that  but  for  the  abstract  theories  of  atoms  and  volumes 
half  of  our  present  chemistry  would  still  remain  to  be  dis- 
covered. He  may  be  silenced,  but  he  is  not  convinced; 
and  the  abstract  remains  for  him  a  nuisance  to  be  ever 
avoided.  Yet  in  this  case  the  abstract  cannot  be  escaped 
if  we  wish  to  understand. 


VALUE  47 

Labour  itself  has  two  sides  to  it.  It  is  qualitative  and 
quantitative. 

The  qualitative  side  is  easy  to  comprehend.  To  create 
value  labour  must  be  expended  on  producing  things  which 
are  useful  to  the  existing  society.  Shirts,  coats,  boots,  iron 
fittings,  ships,  guns,  &c.,  are  all  useful  to-day.  But  obvi-' 
ously  the  quality  of  the  labour  ej:_pend^  on  making  a  shirt 
is  very  different  from  the  quality  of  the  labour  needed  toJ 
produce  a  gun.  Both  shirts  and  guns  are  manifestly 
products  of  human  labour,  the  results  of  the  expenditure 
of  vital  human  energy  in  labour;  but  of  human  labour  of 
quite  a  distinct  quality.     That  is  all  plain  sailing  enough. 

But  the  quantitative  side  of  labour,  what  does  that 
mean?  When,  as  we  now  commonly  say,  the  value  of 
commodities  in  exchange  is  determined  by  the  quantity  of 
labour  relatively  embodied  in  each  of  them,  what  is  meant? 
Here  we  arrive  at  the  abstract  part  of  the  inquiry,  which  is 
not  so  easy  to  grasp. 

It  is,  therefore,  necessary  to  begin  at  the  very  beginning. 
When  two  workers  are  engaged  in  producing  two  different 
articles  such  as  shirts  and  guns,  each  of  them  is  clearly 
exerting  his  own  individual  powers  and  is  embodying  in  the 
product  his  own  individual  work.  But  something  more 
is  being  done  at  the  same  time.  Each  worker  is  embodying 
in  the  commodities  produced  human  labour  on  the  average, 
and  in  the  form  of  abstract,  social  human  labour  too. 
Each  worker  is  expending  his  vital  force  as  an  individual, 
but  he  is  creating  value  at  the  same  time,  as  a  social  unit 
of  a  civilised  society  which  in  the  main  produces  for  ex- 
change. 

Let  us  consider  this  more  closely.  Two  Joiners  set  to 
work  to  make  a  cabinet.  Rpjp  tVip  qna1'^y_<2f  ^•>ip  If^^nr 
is  precisely  the  same. When  finished,  the  two  cabinets  are" 


48  THE  ECONOMICS  OF  SOCIALISM 

exactly  alike.  It  is  impossible  to  tell  the  one  from  the 
other.  But  the  one  joiner  has  worked  with  old-fashioned 
tools  and  without  any  machinery,  thus  entailing  the  ex- 
penditure of  a  great  deal  of  labour.  The  other  has  used 
all  the  most  modern  labour-saving  appliances;  and  thus 
his  cabinet,  though  as  good  in  every  respect  as  the  other, 
has  been  constructed  at  the  expenditure  of  half  the  quan- 
tity of  labour.  The  first  cabinet,  therefore,  made  on  old- 
fashioned  lines,  does,  beyond  all  question,  contain  in 
itself  the  embodiment  of  twice  the  amount  of  individual 
labour  that  the  second  contains.  Yet,  both  being  equally 
well  made,  they  have  precisely  the  same  exchange  value  in 
relation  to  other  goods  on  the  market.  No  purchaser,  that 
is  to  say,  cares  a  straw  how  the  cabinets  have  been  made: 
both  are  the  same  to  him.  If  individual  labour  measured 
their  exchange  value,  the  first  cabinet  would  be  worth  twice 
as  much  as  the  second.  It  is  really  of  equal  value.  Conse- 
quently, it  is  clear  that  it  is  not  individual  labour  which  is 
jthe  measure  of  vjlue  injthis  caseThiiE  the  quantity  of  sociaT 
necessary  labour  required  to  make  each  cabmet  at  the 
time  they  are  offered  for  exchange.  This  comes  behind 
both  the  joiners,  while  they  are  at  work,  and  determines 
the  value  of  their  respective  cabinets  in  exchange,  without 
the  slightest  reference  to  the  desire  or  convenience  of  the 
two  workers  themselves. 

Put  in  that  way,  the  quality  of  the  labour  being  identical, 
and  the  product  precisely  similar,  it  is  easy  enough  to 
comprehend  that  the  actual  value  in  exchange  of  the  two 
cabinets  is  dependent,  not  upon  the  quantity  of  labour 
embodied  in  them  by  either  of  the  two  men  as  individuals, 
but  upon  the  general  average  social  cost  in  abstract  social 
human  labour  of  producing  a  precisely  similar  cabinet. 
This  relation  of  exchange  can  only  be  arrived  at,  as  before 


VALUE  49 

stated,  indirectly,  by  competition  and  by  the  higgling  of 
the  market. 

But  change  in  the  quality  of  the  labour  applied  to  and 
embodied  in  commodities  by  no  means  alters  this  truth. 
Two  workers  who  are  engaged  on  producing  the  most 
widely  different  commodities  by  the  application  to  them, 
and  embodiment  in  them,  of  their  individual  labour  of 
totally  distinct  quality,  do,  nevertheless,  in  just  the  same 
way  as  the  two  joiners,  whose  quality  of  labour  was  tlie 
same,  embody  in  these  dissimilar  commodities  a  specific 
quantity  of  simple,  abstract,  social  human  labour.  And 
this,  and  this  alone,  it  is  which  enables  the  value  in  ex- 
change of  these  two  different  commodities  to  be  measured 
relatively  to  one  another  and  other  commodities. 

In  short,  every  individual  worker,  whatever  may  be 
the  individual  quality  of  his  labour,  embodies,  at  the  same 
time  that  he  applies  his  individual  labour  to  the  produc- 
tion of  commodities  a  definite  quantity  of  social  human 
labour  in  the  commodity  which  he  is  producing. 

Xow  we  begin  to  understand  what  this  quantitative 
labour  which  creates  and  measures  value,  what  this  simple, 
necessary,  social  human  labour,  in  the  abstract,  really 
regard  to  any  two  given  commodities,  applies  with  equal 
force  to  the  production  and  exchange  of  all  commodities, 
means.  For  the  same  reasoning,  that  is  used  above  in 
no  matter  how  diverse  their  character  may  be.  If,  for  in- 
stance, to  take  the  example  already  cited,  a  cheap  suit  of 
clothes  is  worth  a  quarter  of  wheat:  if,  that  is  to  say,  a 
suit  of  clothes  is  of  the  same  exchange  value  as  a  quarter 
of  wheat,  and  they  exchange  as  equal  on  the  market,  then 
this  equality  of  exchange  betokens  that,  different  as  the 
quality  of  labour  is  which  is  necessary  to  produce  them, 
and   different   as   are   the   commodities   themselves   when 


50  THE  ECONOMICS  OF  SOCIALISM 

produced,  they  both  represent,  over  and  above  their  special 
peculiarities,  the  embodiment  of  the  same  quantity  of 
socially  necessary  simple  abstract  human  labour  in  the  one 
as  in  the  other. 

If,  also,  that  equation  is  altered  one  way  or  the  other, 
so  that  upon  the  average  a  quarter  of  wheat,  for  instance, 
is  worth  two  suits  instead  of  one,  then  it  is  clear  that 
twice  the  quantity  of  this  labour,  this  social  labour,  is 
embodied  in  the  quarter  of  wheat  that  is  embodied  in  the 
suit  of  clothes. 

Or,  to  put  the  matter  the  other  way.  If  a  machine  is 
invented  which  enables  a  suit  to  be  made  with  one-half  the 
expenditure  of  labour  that  was  formerly  necessary,  if  the 
sort  of  labour  of  which  I  have  spoken  as  needed  for  making 
the  suit  is,  consequently,  reduced  by  one-half;  then  only 
one-half  the  quantity  of  labour  is  embodied  in  the  suit  that 
was  formerly  contained  in  it;  and,  the  quantity  of  labour 
embodied  in  the  quarter  of  wheat,  its  cost  of  production  is 
socially  necessary,  simple  abstract  human  labour,  that  is, 
remaining  unchanged,  it  takes  two  suits  to  afford  an  equiv- 
alent in  exchange  value  for  one  quarter  of  wheat.  Similar 
changes  in  the  necessary  amount  of  labour,  whatever  may  be 
their  proportions,  produce  the  like  change  in  the  relative 
exchange  value  of  the  whole  list  of  commodities  affected. 

It  is  now  still  more  clear  what  this  quantitative  labour 
is  which  measures  the  relative  value  of  commodities  in 
exchange.  It  is  not  the  quantity  of  individual  labour 
which  is  needed  to  produce  each  commodity :  that  may  and 
does  vary  infinitely  with  reference  to  the  production  of 
precisely  similar  commodities.  But  it  is  the  socially  neces- 
sary labour  embodied  in  them  which  measures  their  rela- 
tive value ;  and  this  neither  the  individuals  themselves,  nor 
society  at  large,  can  directly  test  or  measure  in  any  way. 


VALUE  51 

Nobody,  for  example,  can  possibly  tell  how  m<iich  labour 
is  embodied  in  a  commodity  by  the  time  which  any  par- 
ticular individual  has  spent  in  producing  it. 

There  is  not,  and  there  cannot  be  to-day,  any  such  thing 
as  absolute  value  measured  by  time.  All  value  is  relative, 
and  the  value  of  commodities  is  not  estimated  by  them- 
selves, but  only  relatively  to  and  in  other  commodities. 
This  relative  value  is  arrived  at,  also,  indirectly,  by  a 
social  process,  namely  by  exchange,  the  ratio  of  which  ex- 
change is  determined  by  the  higgling  of  the  market:  the 
whole  operation  thus  is  social  from  first  to  last,  equivalence 
being  established  on  the  average  by  the  market  dealings. 

But  now  that  we  have  shown  how  simple  social  human 
labour  in  the  abstract  comes  behind  each  and  every  indi- 
vidual labourer  in  every  department  of  trade,  and  deter- 
mines the  relative  value  of  his  individual  product,  in  ex- 
change with  other  products,  without  his  knowing  it,  or 
being  able  to  tell  the  precise  result  beforehand,  there  is 
still  something  more  to  consider.  Here  again  the  analysis 
has  been  rendered  more  difficult  by  the  endeavours  to  dis- 
cover an  actual  "  unit  of  labour."  The  efforts  thus  made 
to  arrive  directly  at  estimates  of  value  are  equally  foolish 
and  confusing.  There  is,  of  course,  in  present  conditions, 
no  possible  means  of  arriving  at  a  definite,  concrete,  labour 
coin,  so  to  say,  which  shall  establish  the  value  of  commodi- 
ties when  and  as  they  are  produced.  The  individual 
labour-time  it  may  take  to  produce  a  commodity  is,  as  we 
have  seen,  no  test  whatever  of  the  length  of  social  time 
necessary  to  produce  the  same  commodity. 

Nevertheless,  social  labour-time  does  measure  the  value 
of  commodities  with  reference  relatively  to  one  another. 

How  is  this  done? 

Take  the  case  of  weight.    What  is  weight?    That  we 


52  THE  ECONOMICS  OF  SOCIALISM 

can  only  explain  by  concrete  illustrations  of  heavy  bodies. 
To  state  that  it  is  ponderosity  does  not  help  us  a  bit. 
Yet  we  know  well  enough  what  weight  is  by  itself.  More- 
over, we  weigh  things  relatively  to  their  weight  in  other 
things.  We  say,  for  instance,  that  a  bushel  of  wheat  weighs 
60  lbs.  Pounds  of  what?  We  arrive  at  the  fact  that 
there  is  a  bushel  of  wheat,  that  is  60  lbs  of  wheat,  in  the 
scale,  by  balancing  it  against  weights  of  iron  or  other 
metal.  When  the  scale  is  level,  equality  is  evidenced,  and 
the  weight  on  each  side  is  declared  to  be  the  same:  in 
this  case  60  lbs.  But  what  the  unit  of  weight  is,  in  the 
abstract,  we  can  no  more  tell  than  we  could  before  we 
weighed  the  wheat. 

In  chemistry,  likewise,  the  proportions  in  which  various 
elements  mix  with  one  another  were  formerly  stated  in 
atoms,  according  to  the  theory  which  went  by  the  name  of 
the  great  chemist  Dalton ;  and  in  this  way  gases  and  other 
chemicals  were  measured  and,  in  a  sense,  weighed  for  a 
long  time.  But  what  was  the  Daltonic  atom?  Nobody 
knew  and  nobody  knows.  Nowadays,  in  chemistry,  we 
deal  not  with  atoms  but  with  volumes.  Common  air,  salt, 
carbonic  acid  are  expressed  according  to  the  relations  of 
the  volumes  of  the  chemical  constituents  which  compose 
them.  But  what  is  a  volume  in  chemistry?  It  is  just  as 
impossible  to  say  as  what  constituted  an  atom.  None  the 
less,  though  we  do  not  know  what  they  are  —  any  more  than 
we  can  express  in  figures  —  \/-^  —  volumes  serve  the  pur- 
pose of  a  common  measure  of  the  most  diverse  chemical 
compounds. 

So  it  is  with  simple,  abstract,  social  human  labour. 
This  labour  measures  for  us  the  value  in  exchange  of  com- 
modities relatively  to  one  another.  If  less  of  such  labour 
is  embodied  in  a  commodity  it  becomes,  on  the  average,  of 


VALUE  53 

less  value  in  exchange  with  respect  to  commodities  which 
remain  stationary  in  regard  to  the  quantity  of  labour  em- 
bodied in  them.  On  the  other  hand,  more  labour  embodied 
constitutes,  on  the  average,  more  relative  value.  And  this 
is  true  along  the  whole  line  of  commodities. 

But  here  the  objection  is  frequently  urged  that  all  tbis 
takes  no  account  of  skilled  labour,  and  that  if  skilled 
labour,  or  rather  the  skilled  labourer,  is  employed,  he  pro- 
duces much  more  value  in  exchange,  in  a  given  time,  than 
an  unskilled  labourer  will  produce.  That  is  true.  But 
what,  after  all,  does  this  mean  ?  It  means  only  that  skilled 
labour  is  complex  or  higher  labour,  forming  of  itself  a 
multiple  of  simple  labour.  A  highly-skilled  chronometer- 
maker,  for  instance,  produces  more  value  in  exchange  in 
a  day,  a  month,  or  a  year  than  the  most  expert  brick-maker 
in  the  like  period.  All  the  same,  however,  when  the 
chronometer  and  the  bricks  come  to  be  exchanged  they  are 
exchanged  not  on  the  basis  of  skilled  labour  embodied  in 
them,  but  in  proportion  to  the  quantity  of  simple,  social 
abstract  human  labour  embodied  in  them. 

Again,  labour  itself  has  and  can  have  no  value.  It  only 
constitutes  value  when  embodied  in  useful  commodities. 
Labour  as  labour  has  no  more  value  than  weight  as  weight. 
If  a  man  employs  labourers  at  ten  shillings  a  day,  or  at 
any  other  rate  of  wages,  to  dig  holes  and  fill  them  up  again, 
it  needs  no  great  power  of  mind  to  see  that  their  labour 
has  been  embodied  in  no  value,  has  been  as  we  say,  wasted. 
The  labourers  receive  their  wages,  and  are  so  much  the 
better  off;  but  their  labour,  individual  or  social,  consti- 
tutes no  value,  and  has  no  value  when  expended.  And,  but 
for  the  payment  of  wages,  all  the  world  would  see  that 
labour  itself  is  destitute  of  value.  It  has  and  only  can 
have  value,  as  has  been  said,  when  embodied  in  useful 


54  THE  ECONOMICS  OF  SOCIALISM 

articles.  But,  when  embodied  in  such  useful  articles,  it  is 
the  sole  basis  and  measure  of  value. 

Thus  the  analysis  has  brought  us  round  to  the  point 
where  a  full  conception  can  be  formed  of  what  sort  of 
human  labour  it  is  which  measures  the  value  of  com- 
modities. 

The  truth  in  relation  to  the  theory  of  value  is  disguised 
from  ordinary  observers  to-day  by  the  phenomena  of  price. 
Everybody  is  so  accustomed  to  look  at  the  current  market 
price,  and  to  estimate  the  value  of  that  which  has  been 
produced,  or  of  that  which  they  wish  to  buy  or  to  sell, 
almost  on  the  instant,  by  this  price  current,  that  what  lies 
at  the  bottom  of  all  the  ups  and  downs  of  this  special  form 
of  value  is  forgotten. 

Time  was,  (and  is  still  in  some  parts  of  the  world,) 
when  the  relations  of  exchange  of  all  commodities  to  one 
another  were  expressed  in  some  one  commodity,  and  yet 
that  one  commodity  was  neither  gold  nor  silver.  Cowries, 
hides,  salt,  bullocks,  iron,  copper,  have  all  performed,  and 
some  of  them  perform  still,  the  function  of  a  medium  of 
exchange,  as  well  as  of  a  standard  of  value,  in  different 
parts  of  the  world.  They  are  used  in  this  way  because 
they  are  at  one  and  the  same  time  useful  in  the  existing 
social  conditions,  and  embody  in  themselves  human  labour. 

These  commodities,  however,  alike  as  standards  of  value 
and  as  currency,  are  much  too  cumbrous  for  the  needs  of 
commerce.  What  is  required  when  trade  grows,  and  ex- 
change becomes  the  dominant  factor  in  production,  is 
something  which  in  itself  is  useful ;  which  embodies  a  great 
deal  of  human  labour  in  a  small  compass ;  which  can  easily 
be  divided  up  into  fixed  weights  or  quantities  and  recom- 
bined  again  without  loss;  which  is  not  subject  to  rapid 
deterioration;  and  which,  on  the  average,  maintains  its 


VALUE  55 

cost  of  production  at  nearly  the  same  level  over  long 
periods. 

Now,  all  these  qualities  are  possessed  by  gold  and  silver 
to  a  greater  extent,  on  the  whole,  than  anything  else.  Pri- 
marily, also,  they  are  useful  commodities,  and  abstract, 
simple  human  labour  is  embodied  in  the  so-called  precious 
metals,  in  just  the  same  way  as  in  other  commodities. 
Moreover,  they  vary  in  value  according  to  the  ease  or  diffi- 
culty with  which  they  are  procured  —  that  is,  according 
to  the  amount  of  labour  which  enables  them  to  be  ob- 
tained, and  is  embodied  in  them.  Scarcity  in  this  case,  as 
in  nearly  all  others,  simply  means  difficulty  of  attainment : 
the  need  for  expending  more  labour,  on  the  average,  in 
order  to  obtain  a  definite  quantity  of  gold  or  silver.  Plenty 
betokens,  on  the  other  hand,  ease  of  attainment ;  the  amount 
of  labour  required  to  bring  to  market  a  definite  weight  of 
gold  or  silver  has  become,  on  the  average,  less. 

Evidently,  if  diamonds  could  be  made  by  mixing  up 
cheap  chemicals  in  a  glass  of  water,  the  value  of  diamonds 
will  approximate  in  the  long  run  to  the  cost  in  human 
labour  of  the  product  of  such  a  simple  and  easy  process. 
Diamonds  are  costly  because  they  embody  to-day  a  great 
deal  of  human  labour,  by  reason  of  the  amount  of  such 
labour  which  is  of  necessity  expended  in  procuring  them 
in  Brazil,  South  Africa,  or  elsewhere.  They  are  subject,  in 
fact,  in  the  long  run,  to  the  laws  which  govern  all  other 
commodities. 

Just  so  with  silver  and  gold.  They  are  commodities, 
and  can  be  used  to  measure  the  value  of  other  commodities 
simply  because  they  comprise  in  themselves  the  embodi- 
ment of  a  greater  or  less  quantity  of  social  human  labour 
measured  by  time.  They  thus  become  the  convenient  ex- 
pression of  the  value  of  their  fellow-commodities.     But  it 


66  THE  ECONOMICS  OF  SOCIALISM 

must  never  be  forgotten  that  as  gold  or  silver  measures 
the  value  of  other  commodities  in  the  form  of  value  which 
we  know  as  price,  so  these  other  commodities  themselves 
measure  the  value  of  the  precious  metals.  Just  as  in  all 
exchange  every  sale  is  a  purchase,  and  every  purchase  a 
sale,  according  to  the  side  from  which  it  is  viewed,  so  with 
gold  and  silver  as  measures  of  the  value  of  other  commodi- 
ties; these  other  commodities  likewise  measure  their  value 
—  quantity  of  social  human  labour  embodied  being  the 
basis  of  relation  and  comparison  in  every  case. 

In  addition  to  the  conveniences  briefly  enumerated 
above,  in  using  gold  or  silver  as  the  standard  of  value,  and 
then  as  currency,  it  is  also  to  be  noted  that,  as  a  rule,  their 
own  value  fluctuates  within  narrow  limits.  The  quantity 
of  labour  embodied  in  an  ounce  of  gold  has  varied  slowly. 
But  there  is  nothing  to  prevent  such  fluctuations  from  be- 
coming much  greater.  Gold  itself  might  become,  weight 
for  weight,  as  costly  as  diamonds,  or,  on  the  other  hand, 
as  cheap  as  iron.  The  same  with  silver.  History,  or  tra- 
dition, even  tells  us  of  a  moment  when  the  Phoenicians 
used  anchors  of  silver. 

Moreover,  both  gold  and  silver  being  themselves  com- 
modities, and  dependent  for  their  value  relatively  to  other 
commodities  on  the  quantity  of  labour  embodied  in  a  defi- 
nite weight  of  each,  the  same  rule  applies  to  these  two 
precious  metals  in  relation  to  one  another.  Both  may  be 
simultaneously  used  as  currency;  but  both  cannot  possibly 
be  used  at  the  same  time  as  a  standard  of  value  for  all  other 
commodities.  The  cost  of  production  is  certain  to  fluctuate 
between  them,  and  the  one  precious  metal  will  be,  and 
must  be,  a  commodity  in  respect  to  the  other.  Gold  may 
be  the  better  standard  of  value,  or  silver  may  be  the  better 
standard ;  but  it  is  manifest  that  two  commodities  whose 


VALUE  57 

value  varies  the  one  with  reference  to  the  other  cannot 
both  constitute  a  standard  of  value,  on  a  permanent  basis, 
at  the  same  time,  no  matter  what  laws  may  try  to  prescribe 
to  the  contrary. 

When,  however,  the  value  of  all  commodities,  instead  of 
being  estimated  in  one  another  by  barter,  special  higgling 
between  individuals  as  buyers  and  sellers  and  so  on,  is 
fixed  with  reference  to  one  special  commodity,  which  in 
all  wealthy  countries  to-day  is  gold,  then  this  form  of 
value  assumes  a  particular  aspect  and  is  known  as  price. 
The  quantity  of  social  labour  embodied  in  definite  quanti- 
ties of  the  whole  series  of  commodities  —  coats,  hats,  guns, 
bushels  of  wheat,  diamonds,  dozens  of  wine,  &c.,  &c. —  is 
expressed  in  a  certain  weight  of  gold,  which  itself  repre- 
sents the  same  quantity  of  social  labour  as  these  quantities 
of  commodities  each  and  all  severally  do.  And  gold,  itself, 
as  it  is  dug  from  out  of  the  earth,  represents  a  corporeal 
embodiment  of  human  labour,  and  can  thus  be  used  to 
measure  the  value  of  all  other  commodities. 

For  convenience  of  currency  it  is  divided  into  weights 
larger  or  smaller,  and  the  stamp  which  the  government 
places  upon  a  sovereign  or  a  twenty-dollar  gold  piece  merely 
guarantees  that  it  weighs  so  many  grains  of  gold  of  such 
a  degree  of  fineness.  But  this  stamp,  of  course,  adds  no 
additional  value  whatever  to  the  gold  itself.  That  value 
is  determined,  as  so  often  repeated,  by  the  quantity  of 
labour  embodied  in  it  and  in  the  commodities,  which  it 
exchanges  for,  or  purchases. 

The  cost  of  production  of  gold,  though  it  changes  less 
than  in  many  other  things,  does  fluctuate  considerably  at 
times.  Thus  the  great  gold  discoveries  in  California  and 
Australia  from  1849  to  1851  so  materially  affected  the 
relative  value  of  gold  that  its  purchasing  power,  its  ex- 


58  THE  ECONOMICS  OF  SOCIALISM 

change  ratio  with  respect  to  other  commodities  whose  value 
remained  stationary,  fell  greatly,  and  long  and  abstruse 
disquisitions  were  penned  as  to  what  might  be  the  effect  on 
trade  and  commerce  of  a  permanent  fall  in  the  value  of 
gold.  The  quantity  of  labour  embodied  in  a  given  weight 
of  gold  having  been  reduced  by  the  discovery  of  richer 
mines,  the  cost  in  labour  of  putting  it  upon  the  market, 
that  is,  having  been  greatly  lessened,  its  equivalent  value  in 
other  commodities  became  much  smaller  than  it  was  before. 

From  1849  onwards  for  some  years  there  was,  conse- 
quently, an  universal  and  continuous  rise  of  prices  in  all 
gold-using  countries,  which  gave  a  great,  and  at  first  sight 
what  seemed  likely  to  be  a  permanent,  impetus  to  trade; 
producers  calculating  that,  owing  to  this  continuous  rise, 
they  would  always  be  able  to  dispose  of  their  commodities 
at  a  relatively  higher  price  than  they  had  been  called  upon 
to  pay  for  their  raw  materials,  labour-power,  &c.  What 
actually  happened  will  be  seen  later  and  the  reasons  for 
their  miscalculation  given.  But  during  the  whole  period 
of  this  rise  in  prices,  due  to  the  relative  depreciation  in 
the  value  of  gold,  commodities  whose  cost  of  production 
in  social  human  labour  remained  stationary  exhibited  no 
change  whatever  in  regard  to  their  values  in  relation  to 
one  another. 

On  the  other  hand,  it  is  certain  that,  quite  apart  from 
the  effects  produced  by  the  demonetisation  of  silver  and 
the  consequently  increased  demand  for  gold  in  certain 
European  countries,  the  cost  of  production  of  gold  has  in- 
creased at  times  in  comparison  with  its  cost  at  another 
period.  This  had  the  effect,  therefore,  of  enhancing  the 
purchasing  power  of  gold  relatively  to  all  other  commodi- 
ties. Prices  have  then,  in  fact,  fallen  all  along  the  line, 
and  have  fallen  continuously,  producing  upon  the  mind 


VALUE  59 

the  effect  of  a  decrease  of  wealth,  and,  perhaps,  to  some 
extent,  discouraging  production.  But  in  this  instance, 
also,  commodities  whose  cost  of  production  in  social  human 
labour  had  remained  stationary  exchanged,  relatively  to  one 
another,  on  the  same  level  that  they  did  before. 

Tlius  it  appears  that,  according  to  the  greater  or  less 
cost  of  obtaining  gold,  there  will  be  a  fall  or  a  rise  in  values 
of  other  commodities  as  measured  in  gold;  that  is  to  say, 
there  will  be  a  fall  or  a  rise  in  prices  all  around.  But  this 
does  not  mean  a  fall  in  the  relative  values  of  commodities 
to  one  another  all  round.  That  is  an  impossibility.  A 
general  fall  in  prices  is  a  matter  of  common  experience: 
a  general  fall  in  relative  values  nobody  ever  saw,  or  can 
ever  see. 

It  is  scarcely  necessary  to  say  that  all  this  has  nothing 
to  do  with  the  so-called  "  value  of  money,"  as  we  read  of 
it  in  the  daily  newspapers.  That  is  only  another  instance 
of  the  confusion  introduced  by  the  use  of  the  word  "  value  " 
in  different  senses.  "  Value  of  money,"  as  used  in  the 
money  market,  means  that  the  interest  which  borrowers  are 
willing  to  pay  for  the  loan  of  sums  of  money  for  a  fixed 
term  is  higher  or  lower.  The  purchasing  power  of  gold 
may  be  very  high  indeed,  and  the  "  value  of  money,"  in  the 
City  sense,  may  be  very  low  indeed.  Or  the  purchasing 
power  of  gold  may  be  very  low  indeed,  and  yet  the  "  value 
of  money,"  in  the  City  sense,  may  be  very  high  indeed. 
Very  different  considerations  here  come  in. 

Two  quotations  from  authors  who  wrote  at  a  distance  of 
two  hundred  years  the  one  from  the  other  will,  though 
stating  the  matter  in  a  completely  abstract  shape,  help  still 
further  to  illustrate  the  problem  before  us. 

Sir  William  Petty  writes :  "  The  earth  is  the  mother 
and  labour  the  father  of  all  wealth."     Belfort  Bax  says: 


eO  THE  ECONOMICS  OF  SOCIALISM 

"  The  earth  is  formless  matter,  and  value  (in  this  case 
money)  is  matterless  form,  separated  from  its  parent  by 
the  whole  universe  of  commodities." 

Now,  price  is  only  the  money-name  for  value.  And  the 
"  matterless  form "  here  spoken  of  is  that  quantitative, 
simple,  abstract,  social  human  labour,  expressed  in  money, 
which  measures  the  value  of  the  universe  of  commodities 
in  relation  to  one  another.  Just  as  an  individual  worker, 
while  producing  a  commodity,  creates  at  the  same  time  a 
definite  quantum  of  social  labour-value,  so  a  lump  of  gold, 
when  produced,  expresses  a  definite  quantum  of  social 
labour-value. 

Let  it  be  repeated  once  more  that  we  cannot  tell,  by  any 
process  that  it  is  possible  to  apply  to-day,  how  mwch 
simple,  abstract,  social  human  labour  is  incorporated  in  a 
ton  of  iron,  in  a  hat,  in  a  dozen  shirts,  in  a  quarter  of 
wheat,  in  an  ounce  of  gold.  There  is  no  clue  to  this  what- 
ever in  the  amount  of  individual  labour  that  may  be 
necessary  to  produce  either  of  them  in  any  particular  case. 
The  time  occupied  by  any  individual  worker  is  no  test. 
The  lump  of  gold  may  vary  in  value  in  reference  to  other 
commodities.  None  the  less,  however,  the  quantity  of 
labour  incorporated  is  determined  not  actually,  but  rela- 
tively, in  equivalence  with  definite  quantities  of  other  com- 
modities. This  equivalence,  and  therefore  the  social  mini- 
mum of  time  required  for  production,  being  determined  by 
competition  and  the  higgling  of  the  market,  and  repre- 
sented in  the  money  form  by  the  day-to-day  price. 

Gold,  however,  performs  more  than  one  duty  in  our 
society  to-day. 

It  measures  the  value  of  all  commodities  in  social 
human  labour,  because  it  is  itself  "the  socially  recognised 
incarnation  of  human  labour."     In  this  respect  it  forms 


VALUE  61 

an  actual  standard  of  value  for  the  whole  universe  of 
commodities  exterior  to  itself. 

It  acts  as  a  standard  of  price  hy  reason  of  the  fact  that 
"  it  is  a  fixed  weight  of  metal." 

To  quote  Marx: 

"  As  the  measure  of  value  it  serves  to  convert  the  values 
of  all  the  manifold  commodities  into  prices,  into  imaginary- 
quantities  of  gold:  as  the  standard  of  price  it  measures 
those  quantities  of  gold.  Tlie  measure  of  value  measures 
commodities,  considered  as  values:  the  standard  of  price 
measures,  on  the  contrary,  quantities  of  gold  by  a  unit 
quantity  of  gold,  not  the  value  of  one  quantity  by  the 
weight  of  another.  In  order  to  make  gold  a  standard  of 
price  a  certain  weight  must  be  fixed  upon  as  the  unit.  .  .  . 
But  only  in  so  far  as  it  is  in  itself  a  product  of  labour,  and, 
therefore,  potentially  variable  in  value,  can  gold  serve  as  a 
measure  of  value." 

In  addition,  and  in  consequence  of  this,  gold  serves  as  a 
medium  of  currency  for  tlie  circulation  of  commodities. 
It  likewise  serves  as  a  means  of  payment.  And,  in  the 
form  of  bullion,  gold  is  used  as  international  money  to 
balance  international  trade  accounts  and  make  international 
payments. 

In  a  society  where  goods  should  be  produced  for  the 
general  use,  and  labour  was  expended  co-operatively,  the 
whole  problem  of  value  would  be  turned  round  the  other 
way.  The  question  then  would  be:  "How  many  hours  of 
average  toil  will  be  needed  to  produce  so  many  tons  of 
iron,  so  many  coats,  so  many  hats,  &c.,  as  may  be  sufficient 
to  supply  all  the  wants  of  the  community  in  respect  of  these 
different  articles?"  When  this  was  settled,  and  the  goods 
were  available,  anyone  who  knew  the  figures  could  tell 
without  any  difficulty,   not  indirectly  but  directly,  pre- 


63  THE  ECONOMICS  OF  SOCIALISM 

cisely  how  much  social  labour,  as  measured  by  time,  was 
incorporated  in  every  useful  article  to  be  found  in  the 
communal  stores.  And  each  improvement  in  power  of 
production  would  reduce  the  amount  of  social  labour-time 
which  it  would  be  necessary  to  expend  in  order  to  produce 
any  given  article. 

But  we  are  a  long  way  from  that  point  yet.  Our  com- 
modities, it  is  true,  are  produced  for  social  use,  into  which 
they  find  their  way  by  the  route  of  exchange.  But  this 
production  takes  place  under  individual  control,  and  with 
widely  different  tools,  machines  and  appliances  (whose 
power  it  is  impossible  for  us  to  average)  brought  into  play 
to  make  precisely  similar  articles.  Consequently,  the  law 
by  which  the  necessary  average  quantity  of  social  human 
labour  embodied  constitutes  value  can  only  work  indirectly 
and  relatively,  and  makes  its  power  felt  at  times  in  a  very 
disturbing  way. 

Now,  in  considering  this  problem  of  value,  it  will  be 
observed  that  up  to  the  present  time  nothing  has  been 
said  about  Supply  and  Demand,  or  Demand  and  Supply. 
Nevertheless,  by  a  school  of  economists  which  once  had 
considerable  influence,  the  supply  and  demand  theory  of 
the  value  of  commodities  was  held  to  solve  every  diffi- 
culty. The  errors  which  thus  arose  are  by  no  means  wholly 
extirpated  even  to-day;  though  they  appear  in  a  new 
shape,  girt  in  a  modern  dress  of  confusing  terminology,  and 
shielded  from  the  light  of  truth  by  a  huge  panoply  of  in- 
applicable mathematical  formulae. 

It  must  be  admitted  that  the  idea  of  supply  and  demand, 
as  permanently  regulating  value  in  exchange,  presents 
something  very  fascinating  to  the  commonplace  mind. 
The  whole  theory  is  so  simple.  There  is  nothing  abstract 
or  difficult  of  comprehension  here.     The  facts  adduced  fit  in 


) 


VALUE  63 

with  our  e very-day  experience:  the  deductions  drawn  seem 
an  inevitable  consequence  from  the  facts. 

Everybody  knows,  for  instance,  that  there  are  frequently 
on  the  market  more  goods  of  a  certain  kind  than  the  de- 
mand will  cover  at  the  old  rate  of  exchange.  When  this 
is  the  case,  to  any  considerable  extent,  the  price  of  the  par- 
ticular commodity  thus  over-supplied,  and  its  relative  value 
to  all  other  commodities  whose  supply  is  regulated  in  ac- 
cordance with  previous  conditions,  must  fall,  and  does  fall, 
often  very  heavily,  more  particularly  if  the  article  happens 
to  be  perishable.  The  sellers  are  anxious  to  dispose  of 
their  goods  at  some  price.  The  buyers,  soon  finding  out 
how  matters  stand,  reduce  their  biddings,  and  so  the  value 
falls;  often  out  of  all  proportion  to  the  extent  of  the  over- 
supply,  and  not  unfrequently  even  below  the  actual  cost  or 
price  of  production  of  the  articles,  which  are  sacrificed  at 
what  are  called  slauglitcr  prices.  For  the  time  being, 
therefore,  it  is  manifest  that  supply  and  demand  have  in 
such  circumstances  a  crucial  influence  on  relative  value. 

Conversely,  when  there  is  a  short  supply  of  goods  for 
which  there  is  a  brisk  demand  their  value  rises  and  again 
rises  in  many  instances,  as,  for  example,  in  the  case  of 
necessaries  of  life,  out  of  all  proportion  to  the  diminution 
of  the  supply  relatively  to  the  demand.  As  in  the  former 
case  cost  of  production,  quantity  of  labour  and  the  rest  of 
it,  is  temporarily  lost  sight  of.  This  time  the  buyers  are 
as  eager  to  buy  as  the  sellers  in  the  former  case  were 
eager  to  sell,  and  prices  may  rise  to  a  phenomenal  height. 
Here  also  it  is  manifest  that,  for  the  time  being,  demand 
and  supply  have  a  crucial  influence  on  relative  value. 

But  for  the  time  being  only.  These  are  merely  inci- 
dents in  the  ups  and  downs  of  that  blind  individual  compe- 
tition through  which  our  present  social  system  works  to  its 


64  THE  ECONOMICS  OF  SOCIALISM 

end.  Under  present  conditions  both  sellers  and  buyers, 
both  producers  and  consumers,  are  creatures  of  the  society 
around  them.  The  producer  must  sell  what  he  has  pro- 
duced and  the  consumer  must  consume  what  his  social 
position  requires.  On  both  sides  of  the  transaction  there 
is  demand  and  on  both  sides  likewise  is  supply.  Saleable 
values  on  the  one  hand  encounter  and  exchange  for  sale- 
able values  on  the  other. 

But  beneath  all  the  temporary  ups  and  downs  the  quan- 
tity of  labour  socially  necessary  to  produce  the  articles 
exchanged  regulates  the  permanent  value  in  exchange. 
This  is  recognised,  alike  in  theory  and  in  practice,  by  every 
producer.  He  knows  right  well  that  what  regulates  the  sale 
value  of  his  commodity  is  the  general  cost  of  production  in 
human  labour  of  that  commodity,  and  he  is  forced  by  com- 
petition to  disregard  temporary  fluctuations  in  a  constant 
effort  to  bring  his  own  individual  cost  below  the  average 
level. 

But  let  us  hear  what  Karl  Marx,  who  has  sometimes 
been  accused  of  neglecting  this  side  of  the  value  problem, 
says  on  the  matter: 

"  Price  is  the  money-name  of  the  labour  realised  in  a 
commodity.  Hence  the  expression  of  the  equivalence  of 
a  commodity  with  the  sum  of  money  constituting  its  price 
is  a  tautology,  just  as  in  general  the  expression  of  the  rela- 
tive value  of  a  commodity  is  a  statement  of  the  equivalence 
of  two  commodities.  But  although  price,  being  the  ex- 
ponent of  the  magnitude  of  a  commodity's  value,  is  the 
exponent  of  its  exchange-ratio  with  money,  it  does  not 
follow  that  the  exponent  of  this  exchange-ratio  is  neces- 
sarily the  exponent  of  the  magnitude  of  the  commodity's 
value.     Suppose  two  equal  quantities  of  socially  necessary 


VALUE  65 

labour  to  be  respectively  represented  by  1  quarter  of  wheat, 
and  £2  (nearly  Y^  oz.  of  gold),  £3  is  the  expression  in 
money  of  the  magnitude  of  the  value  of  the  quarter  of 
wheat,  or  is  its  price.  If  now  circumstances  allow  of  this 
price  being  raised  to  £3,  or  compel  it  to  be  reduced  to  £1, 
then  although  £1  and  £3  may  be  too  small  or  too  great 
properly  to  express  the  magnitude  of  the  wheat's  value, 
nevertheless  they  are  its  price  —  for  they  are,  in  the  first 
place,  the  form  under  which  its  value  appears,  i.  e.,  money ; 
and,  in  the  second  place,  the  exponents  of  its  exchange- 
ratio  with  money.  If  the  conditions  of  production,  in 
other  words,  if  the  productive  power  of  labour  remain  con- 
stant, the  same  amount  of  social  labour-time  must,  both 
before  and  after  the  change  in  price,  be  expended  in  the 
reproduction  of  a  quarter  of  wheat.  This  circumstance 
depends  neither  on  the  will  of  the  wheat  producer  nor  on 
that  of  the  owner  of  other  commodities. 

"  Magnitude  of  value  expresses  a  relation  of  social  pro- 
duction; it  expresses  the  connection  that  necessarily  exists 
between  a  certain  article  and  the  portion  of  the  total  labour- 
time  of  society  required  to  produce  it.  As  soon  as  magni- 
tude of  value  is  converted  into  price,  the  above  necessary 
relation  takes  the  shape  of  a  more  or  less  accidental  ex- 
change-ratio between  a  single  commodity  and  another,  the 
money  commodity.  But  this  exchange-ratio  may  express 
either  the  real  magnitude  of  that  commodity's  value,  or  the 
quantity  of  gold  deviating  from  that  value,  for  which,  ac- 
cording to  circumstances,  it  may  be  parted  with.  The 
possibility,  therefore,  of  quantitative  incongruity  between 
price  and  magnitude  of  value,  or  the  deviation  of  the 
former  from  the  latter,  is  inherent  in  the  price-form  itself. 
This  is  no  defect,  but,  on  the  contrary,  admirably  adapts 


66  THE. ECONOMICS  OF  SOCIALISM 

the  price-form  to  a  mode  of  production  wliose  inherent  laws 
impose  themselves  only  as  the  mean  of  apparently  lawless 
irregularities  that  compensate  one  another. 

"  The  price-form,  however,  is  not  only  compatible  with 
the  possibility  of  a  quantitative  incongruity  between  magni- 
tude of  value  and  price,  i.  e.,  between  the  former  and  its 
expression  in  money,  but  it  may  also  conceal  a  qualitative 
inconsistency  —  so  much  so  that  although  money  is  noth- 
ing but  the  value-form  of  commodities,  price  ceases  alto- 
gether to  express  value.  Objects  that  in  themselves  are  no 
commodities,  such  as  conscience,  honour,  etc.,  are  capable 
of  being  offered  for  sale  by  their  holders,  and  of  thus  ac- 
quiring, through  their  price,  the  form  of  commodities. 
Hence  an  object  may  have  a  price  without  having  value. 
The  price  in  that  case  is  imaginary,  like  certain  quantities 
in  mathematics.  On  the  other  hand,  the  imaginary  price- 
form  may  sometimes  conceal  either  a  direct  or  indirect 
real  value-relation;  for  instance,  the  price  of  uncultivated 
land,  which  is  without  value,  because  no  human  labour  has 
been  incorporated  in  it. 

"  Price,  like  relative  value  in  general,  expresses  the  value 
of  a  commodity  (e.  g.,  a  ton  of  iron),  by  stating  that  a 
given  quantity  of  the  equivalent  (e.  g.,  an  ounce  of  gold) 
is  directly  exchangeable  for  iron.  But  it  by  no  means 
states  the  converse,  that  iron  is  directly  exchangeable  for 
gold." 

The  meaning  of  this  is  surely  quite  clear.  The  fluctua- 
tions of  price  due  to  accidental  conditions  of  thg 'market 
average  themselves  over  long  periods,  and  the  truth  of  the 
social  labour  theory  of  value  manifests  itself  even  through 
these  very  perturbations. 

But  of  course  the  majority  of  Professors  of  Political 
Economy  do  not  see  that  the  above  analysis  is  correct. 


VALUE  67 

They  call  it  "  rubbish,"  with  the  illustrious  Professor 
Flint;  pass  it  by  on  the  other  side,  while  endeavouring  to 
make  use  of  the  distinctions  drawn  by  its  author,  like  the 
still  more  illustrious  Professor  Alfred  Marshall ;  or  imagine 
that  they  have  entirely  crushed  it  into  insignificance  when 
they  point  out  that  an  oak  has  more  value  than  an  elm, 
in  common  with  that  most  illustrious  Professor  Bohm- 
Bawerk ! 

To  imagine  that  all  this  is  really  done  in  good  faith  is  to 
flatter  the  honesty  of  these  learned  gentlemen  at  the  ex- 
pense of  their  intelligence.  But  seeing  that  another  well- 
known  Professor  actually  argued  with  me  at  a  public 
gathering  against  the  social  labour  value  theory  on  the 
ground  that  crinolines  when  out  of  fashion  were  of  little 
value  and  were  disposed  of  for  next  to  nothing ;  thus  omit- 
ting to  consider  that  when  first  in  fashion  they  sold  for 
many  times  their  labour  value  —  seeing,  I  say,  that  such 
mental  carelessness  as  this  passes  muster  for  sound  con- 
troversy even  among  the  intelligent,  it  is  indeed  impossible 
to  set  a  limit  to  the  ignorance  of  the  learned. 

What  disguises  from  them  the  truth  must,  we  may  rea- 
sonably assume,  be  the  difficulty  already  commented  upon 
of  apprehending  the  fact  that  it  is  social  human  labour 
which  constitutes  value  and  measures  value  according  to 
the  minimum  of  social  labour  time  necessary,  as  deter- 
mined by  competition  and  higgling  of  the  market,  to 
produce  the  various  commodities  in  our  present  society. 
Once  the  meaning  of  this  simple  abstract  necessary  social 
human  labour  embodied  to-day  in  commodities,  tinder  the 
social  conditions  of  free  competition,  with  individual  con- 
trol and  for  individual  exchange,  is  thoroughly  grasped, 
the  problem  of  value  is  solved  and  further  analysis  becomes 
possible.     Then,  too,  the  minor  difficulty  of  fluctuations 


68  THE  ECONOMICS  OF  SOCIALISM 

of  value  ceases  to  trouble  the  inquirer,  who  sees  that,  to 
use  the  common  illustration,  they  affect  the  basis  of  value 
no  more  than  the  waves  of  the  sea  or  an  exceptionally  high 
tide  influence  the  general  sea  level. 

Simple  abstract  social  human  labour,  to  conclude  with  a 
last  repetition,  comes  behind  all  individual  producers  and 
measures  the  value  in  exchange  of  their  wares,  as  compared 
with  and  exchanged  for  other  wares,  quite  without  refer- 
ence to  them:  they  themselves  perform  a  social  function 
and  call  into  being  a  social  measure  of  value,  at  the  same 
time  that  they  perform  their  individual  tasks  and  exercise 
their  individual  skill  and  capacity.  When  this  quantity  of 
social  labour  value  embodied  in  a  commodity,  instead  of 
being  expressed  or  represented  in  the  relative  social  labour 
value  of  other  commodities,  is  expressed,  in  common  with 
these  other  commodities,  in  relation  to  one  special  commod- 
ity, gold,  then  value  takes  its  money  name  and  becomes 
price.  But  this  is  only  because  gold  itself  is  subject  to  the 
same  law  of  value  as  other  commodities,  and  can  be 
measured  in  the  common  term  with  them,  namely,  labour. 

This  means,  therefore,  that  all  commodities  which  ap- 
pear on  the  market  of  the  world  for  exchange  are  estimated 
relatively  to  one  another  as  portions  of  the  amount  of 
necessary  social  labour  exerted  by  liuinan  beings  to  pro- 
duce them  —  aliquot  parts  of  the  social  labour  day,  or 
week,  or  month  —  measured  by  time.  It  matters  not  how 
or  by  whom  the  commodities  are  produced,  with  what  tools 
they  are  fashioned,  or  in  what  scale  of  social  development 
they  first  assume  their  final  market  shape.  Whether  raised 
or  made  by  the  highest  skilled  white  labour  with  the  best 
machinery  in  the  United  States;  by  civilised  beings  on  a 
lower  plane  of  economic  development  in  Italy;  by  negroes 
in  Africa ;  by  ryots  in  India ;  or  by  coolies  in  China :  once 


VALUE  69 

the  products  themselves  are  on  the  market  they,  other 
things  being  equal,  lose  every  vestige  of  their  origin,  all 
trace  of  their  particular  environment,  during  production. 
They  are  simply  incarnations  of  quantity  of  social  labour 
in  various  shapes,  and  their  relative  value  is  so  measured 
not  directly  by  themselves  but  in  one  another. 
To  sum  up: 

1.  All  exchanges  are  upon  the  average  conducted  on  an 
equality. 

2.  The  relative  exchange  value  of  articles  of  social  use 
is  measured  wholly  and  solely  by  and  through  other  articles 
of  social  use.  The  only  value  known  to  economics  is  this 
relative  value. 

3.  Value,  thus  defined,  is  measured  by  the  quantity  of 
simple,  abstract,  necessary  social  human  labour  embodied 
in  the  commodities  exchanged :  this  social  human  labour 
comes  behind  the  individual  producers,  whatever  their 
natural  advantages  or  disadvantages,  their  skill  or  lack 
of  skill,  and  estimates  the  value  of  their  respective 
products  in  terms  of  other  commodities. 

4.  Thus  the  value  of  goods  is  not  arrived  a.t. directly  by 
the  time  it  takes  in  special  cases  to  produce  them  but 
indirectly  in  relation  to  other  goods.  And  their  value, 
their  ratio  of  exchange  in  relation  to  other  commodities,  is 
determined  by  competition  and  higgling  of  the  market :  the 
minimum  necessary  labour  time  being  thus  arrived  at  not 
absolutely  but  relatively. 

5.  The  precious  metals,  and  in  our  times  gold  more 
particularly,  are  used  to  estimate  the  value  of  other  com- 
modities and  as  universal  means  of  exchange,  because  they 
themselves,  as  useful  social  articles,  contain  incorporated 
in  them  a  large  quantity  of  social  human  labour  in  propor- 
tion to  their  bulk,  and  for  other  reasons  of  convenience. 


70  THE  ECONOMICS  OF  SOCIALISM 

6.  As  commodities,  whether  ordinary  wares  or  the  pre- 
cious metals,  exchange  in  relation  to  the  quantity  of  simple, 
abstract  necessary  social  human  labour  embodied  in  them, 
or  which  it  costs  to  produce  them,  measured  by  time,  it  fol- 
lows that  the  value  of  commodities  relatively  to  one  another 
varies  in  proportion  to  the  quantity  of  such  labour  em- 
bodied in  them.  If  less  labour  is  embodied  in  them,  if  it 
costs  less  labour  to  produce  them,  their  value  is  less,  other 
things  remaining  the  same;  if  more  labour  is  embodied  in 
them,  if  it  costs  more  labour  to  produce  them,  their  value 
is  greater, 

7.  Gold  is  subject  to  precisely  the  same  laws  as  other 
commodities  in  regard  to  its  relative  value.  But  the  value 
of  all  other  commodities  on  the  markets  of  the  world 
being  now  estimated  with  reference  to  gold,  divided  into 
special  weights  of  that  metal,  the  value  of  all  those  other 
commodities  assumes  a  particular  form  with  respect  to 
gold,  the  universal  commodity,  and  becomes  price.  Price 
being  the  gold-name  or  money-name  for  value. 

8.  All  prices  may  fall:  all  values  cannot  possibly  fall. 

9.  Supply  and  demand  affect  value  and  price  locally  and 
temporarily  only.  Underneath  the  ups  and  downs  thus 
occasioned,  the  law  of  measurement  of  value  in  exchange 
by  the  quantity  of  simple,  abstract,  necessary  social  human 
labour  works  steadily  on. 


CHAPTER  III 

SURPLUS   VALUE 

Having  arrived  at  a  clear  conception  of  what  value  in 
exchange  is,  and  the  measure  of  such  value,  we  are  in  a 
position  to  go  farther  and  examine  how  riches  are  accumu- 
lated, and  whence  they  are  derived,  in  our  existing  society, 
where  the  system  of  capitalist  production  prevails. 

Exchange  means,  on  the  whole,  a  transfer  of  equal  values 
from  one  side  to  the  otlier,  and  vice  versa.  In  such  an 
exchange  there  may  be  great  advantage  derived  by  both 
parties  to  the  transaction,  but  there  can  be  no  profit  to 
either.  Neither  side  has  possession  of  more  value  after 
the  bargain  is  completed  than  it  had  before.  Supposing 
it  to  be  possible  to  barter  directly  a  suit  of  clothes  for  a 
quarter  of  wheat,  which  represents  roughly  an  equality  on 
the  London  market  to-day.  The  one  side  obtains  a  suit 
of  clothes  and  the  other  side  a  quarter  of  wheat,  and,  by 
our  assumption,  each  obtains  what  he  wants:  the  former, 
garments,  the  latter  the  means  of  making  bread.  Not  only 
are  their  social  desires  both  mutually  satisfied  in  this  par- 
ticular regard,  but,  from  the  point  of  view  of  exchange 
value,  each  has  obtained  an  equivalent,  in  social  labour  in- 
corporated in  a  commodity,  in  exchange  for  that  which  he 
has  parted  with.  ^Manifestly  there  is  no  profit  here,  though 
both  sides  are  benefited  by  the  exchange,  and,  the  articles 
being  used  in  consumption,  there  is  an  end  of  the  matter. 

Now,  however,  let  us  assume  that  the  owner  of  the  suit 
of  clothes  is  ignorant  as  to  the  full  value  of  his  commodity, 

71 


72  THE  ECONOMICS  OF  SOCIALISM 

and  parts  with  it  to  the  owner  of  the  wheat  for  a  bushel 
less  than  the  quarter  which  he  ought  to  obtain.  The  per- 
son who  wanted  a  suit  has  obtained  it  at  less  than  its 
market  value;  and  the  one  who  has  parted  with  it  is  in 
possession  of  less  food,  to  the  extent  of  a  bushel  of  wheat, 
than,  on  an  equal  exchange,  he  ought  to  have  received. 
He  is  so  much  the  poorer,  therefore,  and,  having  parted 
with  his  suit  at  less  than  its  full  value,  that  extra  bushel 
of  wheat  will  remain  in  the  hands  of  its  original  possessor, 
in  addition  to  the  suit  which  he  has  acquired.  But  there  is 
no  increase  of  riches  here,  no  accumulation  of  wealth,  no 
amassing  of  surplus  value.  The  suit  and  the  quarter  of 
wheat  still  remain  the  suit  and  the  quarter  of  wheat, 
neither  more  nor  less. 

The  same  applies  all  round.  A  smart  trader  may  get  an 
ounce  of  gold,  or  several  pounds  of  indiarubber,  in  ex- 
change for  a  few  showy  machine-made  clothes.  He  has 
good  reason  to  congratulate  himself.  Nay,  the  ignorant 
savage,  from  his  point  of  view,  has  perhaps  made  a  good 
bargain;  while  the  trader  is  by  so  much  the  richer  man 
when  he  returns  to  Manchester.  But  we  are  still  where  we 
were  before,  from  the  point  of  view  of  economics.  There 
were  cheap  cotton  goods  on  the  one  side  and  gold  or  india- 
rubber  on  the  other.  The  latter  being  made  available  for 
civilised  society  adds  to  the  convenience  of  its  wealthy 
members;  but  the  savage  when  he  comes  to  understand 
what  his  gold,  or  his  indiarubber,  represents  as  value  in 
exchange,  soon  learns  that  he  has  been  outwitted.  He  has 
lost:  the  smart  trader  has  gained.  But  the  total  values 
are  neither  increased  nor  diminished. 

Unequal  exchange,  in  a  word,  like  equal  exchange, 
creates  no  wealth. 

Nor  does  the  use  of  money  affect  this  truth  in  any  way, 


SURPLUS  VALUE  73 

though  it  may  and  does  serve,  in  some  cases,  to  obscure  it. 
WHiether  too  high  a  price  or  too  low  a  price  is  paid  for  a 
commodity  —  whether  too  much  or  too  little  money  value 
is  given  in  exchange  for  it  —  this  only  concerns  the  pur- 
chaser and  the  seller,  in  the  same  way  as  if  the  unequal 
exchange  were  made  with  another  commodity,  instead  of 
with  the  universal  equivalent,  or  exchange  commodity, 
money  itself.  There  were  so  many  sovereigns,  or  gold 
dollars,  on  the  one  side,  and  so  much  of  useful  goods  on 
the  other.  In  whatever  proportions  they  are  exchanged 
there  is  no  increase  of  wealth,  and  no  possibility  of  greater 
social  accumulation.  Before  as  after  the  exchange  there  / 
are  the  same  number  of  sovereigns  and  the  same  quantity  / 
of  goods.  Money,  used  merely  as  a  medium  of  exchange 
for  equal  or  unequal  values,  of  itself  engenders  no  increase 
of  wealth  whatever. 

All  this  is  so  obvious  that  it  would  be  quite  needless  to 
insist  upon  it,  but  for  the  fact  that  by  uneducated  people,  as 
well  as  by  those  who  ought  to  know  better,  it  has  often  been 
assumed  that  riches  are  somehow  created  by  the  equal 
exchange  of  commodities. 

Now,  when  men  and  women  worked  as  chattel  slaves  for 
their  master,  the  great  land  and  slave  owner  of  antiquity, 
or  when  they  worked  as  serfs  for  the  feudal  lord  so  many 
days  in  the  week  without  payment,  there  could  be  no  doubt 
as  to  the  origin  of  the  wealth  which  the  Eoman  noble,  or 
the  French  seigneur,  acquired.  The  slaves,  as  well  as 
their  product  over  and  above  their  keep,  both  belonged  to 
the  great  proprietor  of  ancient  days,  and  the  increase  of  his 
wealth  was  due  wholly  and  solely  to  their  labour. 

The  produce  of  the  serfs,  too,  when  it  went  into  the 
granaries  or  storehouses  of  that  most  superior  person,  the 
baron  or  abbot  of  old  times,  belonged  to  him,  in  like  man- 


74  THE  ECONOMICS  OF  SOCIALISM 

ner;  and  his  wealth  was  increased  in  the  same  way,  though 
now  the  serfs  went  with  the  land,  instead  of  being  bought 
and  sold  as  loose  .chattels.  In  both  these  cases  there  was, 
I  say,  no  illusion  whatever  in  regard  to  "  organisation  of 
labour,"  "  rent  of  ability,"  "  invention  or  application  of 
superior  tools  or  machinery  "  as  the  cause  of  the  wealth  of 
the  great  man  at  the  top.  He  took  the  useful  things  which 
his  slaves  or  villeins  made,  or  raised,  or  extracted  from 
the  mines,  for  him,  allowing  them  to  eat  and  drink  and  be 
clothed  with  just  so  much  as  rendered  them  efficient  agents 
to  provide  him  with  what  he  wanted. 

There  was  no  cant  of  beneficence,  no  pretence  of  "eco- 
nomic harmony,"  about  all  this.  The  improvements  in 
methods  of  production,  such  as  were  made,  told,  as  a 
matter  of  course,  to  the  advantage  of  the  proprietor  of  the 
slaves  and  the  land. 

To-day,  however,  in  the  great  civilised  nations  of  the 
world,  there  are  neither  slaves  nor  serfs  left.  All  the 
workers  are  supposed  to  be  free  men  —  free  and  equal 
men  in  such  countries  as  England  and  America.  But  free 
as  they  are  in  England,  at  any  rate,  all  the  great  means 
and  instruments  of  production  and  distribution,  including 
the  land,  are  in  the  possession  of  one  class;  and  there  is 
another  class  of  perfectly  free  people  whose  drawback  is 
that,  practically  speaking,  they  possess  no  property  — 
excepting  only  one  commodity. 

Such  are  the  necessary  and  inevitable  social  conditions 
in  which  alone  capital  can  become  the  dominant  power  in 
production.  And  the  one  object  of  the  owners  of  capital 
is  to  obtain  a  profit  by  its  employment :  to  realise  by  pro- 
duction of  commodities  all  that  they  had  before  and  some- 
thing more. 

But  how  does  it  come  about  that  the  capitalist  class  sue- 


SUEPLUS  VALUE  75 

ceeds  in  making  a  profit?  How  is  it  that,  with  neither 
slaves  nor  serfs  at  command,  members  of  this  class  contrive 
to  pile  up  wealth  to  an  extent  which  the  greatest  slave- 
owner or  the  most  powerful  baron  could  never  reach? 
They  cannot  do  it  by  equal  or  unequal  exchange;  for,  as 
we  have  seen,  these  of  themselves  can  engender  no  increase. 

Neither  is  it  as  compensation  for  risk  run  that  society 
at  large  thus  permits  them  to  amass  large  fortunes.  Indi- 
vidual capitalists  run  a  risk,  no  doubt,  by  reason  of  the 
competition  of  other  capitalists;  but  the  whole  class  of 
capitalists  runs  no  risk  whatever.  Their  property  in- 
creases as  a  class,  irrespective  of  the  bankruptcy  and  ruin 
of  individuals  of  their  class,  as  can  easily  be  seen  by  com- 
paring the  statistics  of  wealth  in  all  civilised  countries. 

The  fact  remains,  therefore,  that,  without  gain  by  ex- 
change, without  compensation  for  risk,  and,  in  numberless 
cases,  without  the  slightest  social  service  on  their  part  — 
with  far  less  of  social  service,  indeed,  than  even  a  Lucullus 
rendered  to  Rome  —  they  obtain  vastly  increased  wealth. 

Now  money  itself  only  becomes  active  capital  when  it  is 
used  to  buy  raw  materials,  tools,  machinery,  coal,  oil,  and 
so  forth  for  the  purpose  .of  using  tliem  in  production. 
All  these  are  bought  as  commodities  on  the  market  at  their 
market  value.  The  completed  product  is  sold  afterwards, 
and  the  capitalist  has  realised  a  gain.  He  started  with 
money  to  the  amount  of  say,  £100,  and,  after  paying  all 
expenses,  he  finds  himself  at  the  end  of  the  transaction  the 
happy  possessor  of  £110.  Whence  comes  this  additional 
£10  in  money,  over  and  above  his  original  £100? 

The  capitalist  has  bought  with  his  money  the  various 
commodities  he  needs  for  production,  at  their  cost  of  pro- 
duction as  expressed  in  simple,  abstract,  necessary  social 
human  labour  embodied  in  those  commodities.     He  still 


76  THE  ECONOMICS  OF  SOCIALISM 

requires  human  energy  to  transform  these  commodities  into 
the  complete  commodity  in  which  he  himself  specially  deals. 
He  has  no  slaves  —  he  would  be  shocked  if  anyone  proposed 
to  him  to  buy  some;  he  controls  no  serfs  —  he  thanks 
heaven  that  feudalism  Avas  swept  away  long  before  his 
day;  but,  conveniently  for  his  operations,  and  without  his 
having  had  any  say  in  the  matter,  there  stand  just  outside 
his  factory  door  a  crowd  of  men  and  women  who  are  anx- 
ious, nay,  eager,  to  place  themselves  at  his  disposal  for  a 
fixed  time  in  return  for  agreed  pay  —  tliat  is  all  right:  he 
rubs  his  hands  at  having  to  deal  with  genuine  free  people, 
instead  of  slaves  or  serfs,  and  in  they  go  to  work  for  him. 

But  what  is  this  last  purchase  the  capitalist  has  made, 
and  what  is  it  that  these  free  people  so  gladly  sell  to  him? 

Here,  again,  it  is  necessary  to  enter  into  a  brief  abstract 
investigation.  What  is  the  one  commodity,  the  sole  prop- 
erty, which  the  free  and  enlightened  citizens,  who  possess 
neither  land  nor  capital,  either  as  individuals  or  as  a 
community,  have  to  sell?  The  common  answer  is 
"  labour."  But,  as  we  have  already  seen,  clearly,  labour 
has,  of  itself,  no  value  at  all.  Labour  has  value  only  when 
embodied  in  useful  commodities.  The  difficulties  arise 
from  a  loose  use  of  language.  What  the  free  human  be- 
ings without  property  are  so  anxiously  trying  to  sell  is 
therefore  not  labour  but  their  power  to  labour.  This  is 
the  important  commodity  which  they  have  to  dispose  of  to 
the  benevolent  "  organiser  of  labour  "  or  "  captain  of  in- 
dustry," who,  in  the  course  of  his  business,  has  only  the 
decent  desire  to  make  a  wholesome  profit  for  himself. 

But  power  to  labour,  or  labour-power,  which  means  the 
capacity  to  embody  simple,  abstract,  necessary  social  human 
labour  in  commodities,  is  by  no  means  a  good  commodity 


SURPLUS  VALUE  77 

to  have  as  one's  sole  exchangeable  possession.  This  labour- 
power,  though  it  be  itself  the  sole-value-creating  entity,  is 
not  a  good  commodity  to  deal  in,  I  say.  To  begin  with, 
it  won't  keep.  Its  owners,  therefore,  cannot  hold  it  for 
any  length  of  time  for  a  better  market.  Its  value  depends 
upon  the  physical  and  mental  vigour  of  its  sellers,  who 
must  eat  and  drink  adequately  from  day  to  day.  If,  con- 
sequently, they  don't  come  to  terms  with  some  one  or  other 
of  the  capitalist  class,  hunger  begins  to  tell  its  tale,  and 
their  labour-power  loses  at  once  a  portion  of  its  saleable 
value. 

But  this  commodity,  this  labour-power,  though  it  is  a 
function  of  the  human  being,  exchanges  on  the  average, 
like  any  other  commodity,  in  relation  to  its  cost  of  pro- 
duction. Moreover,  it  exchanges  on  an  equality  in  that 
regard.  Labour-power,  therefore,  exchanges,  or  is  bought 
by  the  capitalist,  on  the  same  lines  as  he  has  bought  all  his 
other  materials  of  production.  That  is  to  say,  he  buys 
labour-power  as  a  commodity  at  its  cost  of  production,  as 
measured  by  the  quantity  of  social  human  labour  embodied 
in  the  food,  raiment,  house-room,  fuel  and  other  materials 
which  go  to  create  it  and  keep  it  in  order  without  deteriora- 
tion. Labour-power,  therefore,  is  bought  at  the  cost  of 
subsistence,  or  according  to  the  standard  of  life,  of  the 
workers  who  sell  it,  which  varies  in  different  trades  and  in 
different  countries,  but  always  tends  to  approach  the  mere 
subsistence  level. 

This  is  what  their  wages  paid  in  money  really  represent : 
this  and  nothing  more.  And  it  is  precisely  this  payment 
of  their  standard  of  life,  or  their  cost  of  subsistence,  in  the 
shape  of  money-wages,  which  disguises  from  most  of  the 
vendors  of  labour-power,  the  workers  namely,  the  whole 


78  THE  ECONOMICS  OF  SOCIALISM 

scope  of  the  transaction.  "  What  should  we  do  without  the 
rich  and  the  capitalists?  "  is  a  phrase  by  no  means  confined 
to  the  educated  and  well-to-do. 

This  labour-power,  so  bought  as  a  commodity  on  the  open 
market,  at  its  cost  of  production,  by  payment  of  wages 
equivalent  to  the  standard  of  life  of  the  human  machine 
that  can  expend  and  apply  it,  embodies  more  value,  how- 
ever, in  useful  commodities,  during  the  time  of  production, 
than  it  costs  in  wages.  This  is  a  very  remarkable  peculi- 
arity in  the  commodity,  and  it  is  the  one  from  which  the 
capitalist  derives  his  profit.  None  of  the  other  commodi- 
ties which  he  purchases,  for  the  productive  operation  on 
which  he  is  engaged,  do  anything  for  him  in  this  way. 
But  labour-power  does.  The  capitalist  here  buys  a  com- 
modity which  returns  to  him  all  the  value  he  has  parted 
with  in  the  shape  of  wages,  and  a  surplus  value  in  addi- 
tion thereto. 

But,  before  examining  more  closely  into  the  phenomena 
which  accompany  the  creation  and  appropriation  of  this 
surplus  value,  let  us  see  once  more  what  labour-power  and 
labour  are.  It  is  a  remarkable  fact  that  the  truth  to  which 
our  inquiry  has  conducted  us  can  be  verified  in  actual 
practice.  We  commonly  speak  of  "  cheap  labour,"  as  if, 
when  low  wages  were  paid,  a  really  cheap  article  were  al- 
ways purchased  by  the  capitalist.  But  experience  has 
shown  that  in  cases  where  low  wages  mean  that  those  who 
receive  them  have  an  inferior  physique,  or  live  on  a  lower 
scale  of  subsistence,  there  is  often,  or  even  as  a  rule, 
no  real  gain  to  the  capitalist.  The  late  Thomas  Brassey, 
the  contractor,  discovered,  as  set  forth  by  his  son,  that  the 
cost  of  carrying  out  works  in  countries  in  which  wages 
varied  greatly  was  not  very  different,  and  that  the  prefer- 
ence, so  far  as  profit  to  himself  was  concerned,  was  in 


SURPLUS  VALUE  79 

favour  of  those  countries  where  the  rate  of  wages  was  on 
the  average  highest.  My  friend,  Mr.  George  Collins  Levey, 
who  has  had  buildings  constructed  in  many  different  capi- 
tals, discovered  that  their  cost  was  in  all  cases  nearly  the 
same,  the  cheapest  being  probably  those  set  up  in  America 
where  wages  were  highest. 

The  Indian  coolie,  who  is  paid  a  ridiculously  low  rate 
of  wages,  gives  in  India  no  more  than  the  value  of  those 
wages,  in  comparison  with  the  more  highly-remunerated 
work  of  the  European.  But  the  same  Indian  coolie  in 
Demerara,  where  he  lives  on  a  higher  scale,  is  a  more 
valuable  labourer  than  the  more  muscular  negro.  We  can 
observe  the  like  contrast  in  England.  The  agricultural 
labourer  in  Wiltshire  and  Dorsetshire,  who  used  to  get 
about  9s.  to  lis.  a  week,  was  of  the  same  race  as  the  Cum- 
berland hind  who  received  as  much  as  18s.  or  19s.  a  week. 
But  a  farmer  who  knew  his  business  would  rather  have 
paid  the  latter  man,  with  his  higher  standard  of  life, 
the  higher  wages  than  his  fellow  of  the  Southern  counties 
the  lower.     He  was  a  cheaper  man  at  the  money. 

Another  illustration  may  be  drawn  from  Texas.  There 
a  man  I  knew  was  once  employing  a  number  of  American 
workers  to  do  some  more  or  less  unskilled  work  at  two 
dollars,  or  eight  shillings  and  fourpence,  a  day.  They 
struck  for  two  dollars  and  a  half,  or  ten  shillings  and 
sixpence,  a  day.  There  were  some  Italians  unemployed  at 
the  time  who  were  willing  to  take  the  job  at  a  dollar  a 
day.  My  acquaintance,  who  had  theories  on  the  subject 
of  the  quantity  of  labour  embodied  in  relation  to  the 
standard  of  life,  agreed  to  pay  them  a  dollar  and  a  half 
a  day,  on  condition  that  he  should  supply  them  with,  and 
they  should  eat,  the  same  food  as  the  American  labourers 
who  had  left  him.     He  told  them  further  that  as  soon 


80  THE  ECONOMICS  OF  SOCIALISM 

as  they  were  worth  two  dollars  a  day,  after  the  first  six 
weeks'  work,  he  would  pay  them  at  that  rate.  Within  the 
six  weeks,  the  Italians,  as  a  whole,  were  doing  nearly  as 
good  work  as  the  Americans,  and  within  two  months  all 
were  being  paid  two  dollars  a  day.  They  were  well  worth 
it  to  their  employer,  you  may  be  sure,  who  was  no  phil- 
anthropist at  all. 

The  above  examples  all  apply  to  what  is  known  as  "  un- 
skilled labour,"  but  similar  illustrations  can  be  drawn  from 
the  field  of  "skilled  labour."  In  nearly  every  case  the 
higher  wages,  accompanied  as  they  are  by  a  higher  standard 
of  life,  represent  a  proportional,  or  more  than  proportional, 
quantitative  embodiment  of  simple,  abstract  social  human 
labour  in  commodities. 

This  goes  to  show,  therefore,  that  labour-power,  selling 
or  exchanging  for  wages,  in  relation  to  its  cost  of  produc- 
tion or  standard  of  life  —  the  simple,  abstract,  necessary 
social  human  labour  embodied  in  commodities  —  is  no  mere 
creature  of  the  imagination  but  an  actual  force  for  the 
crystallisation  of  social  human  labour  in  commodities,  un- 
der the  most  varying  conditions  of  country,  climate,  race 
and  rates  of  payment. 

To  return  to  the  purchase  and  sale  of  labour-power, 
and  the  surplus  value  thus  created  and  appropriated  by  the 
capitalist. 

It  matters  not  what  branch  of  manufacture  or  produc- 
tion is  taken,  the  analysis  is  the  same.  Cotton-mill,  iron- 
works, mine,  farm,  they  are,  one  and  all,  from  the  capital- 
ist point  of  view,  not  the  means  and  instruments  for  cre- 
ating useful  articles  for  the  benefit  of  society  but  so  many 
methods  of  obtaining  profit.  It^s^  for  this  reason,  and 
this  reason   alone,  that,  having  capital  in  the  form  of 


SUEPLUS  VALUE  81 

money  in  his  possession,  the  capitalist  buys  his  means  of 
production,  including  tliat  commodity  witliout  which  all 
tKe~rest  would  be  of  no  avail  —  labour-power  —  and  sends 
out  his  own  completed  commodity  into  circulation.  In 
tliis  way,  and  in  this  way  alone,  can  his  £100  which  he 
has  expended  return  with  an  additional  £10  into  his  posses- 
sion. And  this  labour-power,  as  said,  is  purchased  at  its 
cost,  as  represented  in  the  quantity  of  social  labour  in 
commodities  necessary  to  ensure  its  owner's  subsistence. 
Whatever  this  may  represent  on  the  market  of  the  day 
in  money  value,  that  is  the  value  of  his  labour-power: 
the  value  being  arrived  at,  as  with  other  commodities,  not 
directly  but  indirectly,  by  way  of  exchange,  and  determined 
by  competition  on  the  market. 

Now,  Marx  supposes  in  the  case  he  deals  with  that  the 
value  of  the  total  daily  cost  of  a  labourer's  subsistence  is 
represented  by  an  amount  of  food,  fuel,  raiment,  house- 
room,  etc.,  equal  to  what  could  be  produced  by  half-a-day's 
social  labour.  And  if,  on  the  same  assumption,  six  shil- 
lings in  money  is  the  equivalent  of  this  half-a-day's  social 
labour,  then  the  cost  of  the  reproduction  of  the  labour- 
power  purchased  is  six  shillings.  Consequently,  the  labour- 
power  which  the  capitalist  buys  is  well  and  truly  paid  for 
by  six  shillings  a  day.  That  is  to  say,  the  use  of  the 
labour-power  of  the  labourer  for  a  whole  day  is  bought 
by  the  capitalist  for  the  equivalent  in  money  of  half-a-day's 
social  labour;  and  in  paying  this  he  has  paid  its  full 
market  value  as  a  commodity. 

There  is  no  mere  assumption  here.  If  we  add  up  the 
total  cost  of  a  labourer's  subsistence  at  the  present  time 
in  social  labour,  which  means,  of  course,  the  amount  of 
social  jabour  embodied  in  those  things  which  are  needed 


82 


THE  ECONOMICS  OF  SOCIALISM 


to  keep  his  labour-power  in  its  normal  condition,  we  shall 
discover  that  in  the  majority  of  cases  they  reach  less  than 
half -a-d  ay's  social  labour. 

Moreover,  the  worker  gives  the  capitalist  credit  for  his 
commodity.  He  advances  his  labour-power  to  the  monied 
man,  only  receiving  his  wages  at  the  end  of  the  day,  week, 
or  month,  for  which  he  engages  to  sell  it  at  the  agreed 
price.  This  fact,  which  we  see  verified  all  around  us,  and 
the  fact  already  noted  that  labour-power  itself  cannot  be 
kept  in  good  order  without  immediate  sale  by  its  owner, 
show  that  the  sole  commodity  owned  by  the  workers  is 
always  sold  at  a  disadvantage.  This  becomes  still  more  ap- 
parent when  an  employer  goes  bankrupt  and  wages  are 
not  paid ;  or  when  accident,  or  social  causes,  lead  to  a  stop- 
page of  trade. 

We  have  seen  that  in  the  ordinary  business  of  capitalist 
production  the  capitalist  buys  all  his  materials  at  their 
market  cost,  the  machinery,  in  the  case  of  manufacture, 
being  provided  beforehand.  His  expenditure  is  thus  di- 
vided : 


General 
Raw  Materials 
Incidental  Materials 
Wear    and    Tear    of 
Tools  and  Machin- 
ery 
Coal 

Wages  Wages 

Fabm 
Seed 
Manures 

Wear  and  Tear  of  Tools,  Barns 
and  Horses 
Wages 


Cotton  Industry 

Cotton 

Oil,  Gas,  Packing, 
etc. 

Depreciation  of  Ma- 
chinery, Buildings 

Coal 


Iron  Industry 
Iron  Ore 
Fluxes 

Depreciation  of  Fur- 
naces, Mills,  etc. 
Coal 


also 


Mines 
Material 


Here    Raw 

Product 
Wear  and  Tear  of  Tools 
Wages 


The  product  in  each  case,  of  course,  sells  on  theayerage 


SURPLUS  VALUE  83 

for  all  that  it  has  cost  and  more.  If  this  were  not  the 
case  the  capitalist  would  cease  to  produce,  seeing  that  his 
object  is  simply  and  solely  to  make  profit  for  himself. 
When  profit  ceases  he  does,  in  actual  experience,  cease  to 
produce,  regardless  of  the  interests  of  others. 

When,  therefore,  the  capitalist  buys  labour-power  he 
does  so  because  it  comprises  that  most  convenient  property 
for  him  that,  when  expended  in  his  service,  it  adds  more 
value  to  the  commodity  than  its  own  cost  of  production. 
The  assumption,  in  the  case  taken  for  an  example,  is  that 
the  cost  of  the  labourer's  subsistence  is  half-a-day's  social 
labour,  or  in  money-value  six  shillings.  This  is  the  sum 
for  which  he  sells  his  labour-power  to  the  capitalist. 

But  he  sells  his  labour-power  not  for  half-a-day,  or  four 
hours,  but  for  a  whole  day,  or  eight  hours.  Consequently, 
after  the  wage-earner  has  returned  to  his  employer  the  full 
value  of  his  wages  in  the  shape  of  labour  embodied  in 
useful  commodities  during  the  first  four  hours  of  his  day's 
work  he  continues  to  toil  for  another  four  hours  which 
gives  an  equal  amount  of  value,  or  six  shillings'  worth  in 
money;  this  the  employer  takes  and  divides  up  Avith  others. 
That  is  an  example  of  how  surplus  value  is  obtained,  and 
the  four  hours  of  work  over  and  above  the  wage-earner's 
wage  constitutes  so  much  unpaid  labour  —  labour,  that  is, 
which  the  worker  is  bound  by  his  agreement  to  embody  in 
commodities  for  his  employer  but  for  which  he  himself 
receives  nothing. 

This  surplus  value,  however,  is  embodied  in  the  surplus 
of  commodity-value  produced,  and  is  in  the  possession  of 
the  capitalist  before  it  is  exchanged  (with  the  rest  of  the 
product)  and  converted  into  money. 

Obviously,  the  same  applies  in  the  like  manner  to  a 
seven-hour  day,  or  a  six-hour  day.     If  the  value  of  the 


84  THE  ECOxVOMICS  OF  SOCIALISM 

wage-earner's  standard  of  life  is  represented  by  half-a- 
day's  social  labour,  then,  manifestly,  he  works  in  each 
case  three-and-a-half  hours,  or  three  hours,  for  which  he 
receives  no  payment.  And  out  of  this  surplus  value  so 
jv.extractcd,  this  unpaid  labour  so  obtained,  embodied  in 
goods  for  exchange,  the  landlord,  the  income-receiver,  the 
commission-agent,  the  profit-monger,  the  banks  and  so  on, 
all  obtain  their  share.  Not,  however,  that  the  amount  of 
surplus  value  relatively  to  wages,  or  of  unpaid  to  paid 
labour,  is  generally  so  small  as  this.  On  the  average,  the 
rate  of  unpaid  to  paid  labour  in  a  country  such  as  Eng- 
land is  nearer  two  or  three  to  one,  than  one  to  one  as  in 
the  above  illustration.  That  is  to  say,  the  worker,  for 
every  hour  he  works  for  himself,  works  two  or  three  hours 
for  the  benefit  of  other  people,  who  may  or  may  not  do 
any  useful  social  work  at  all. 

One  day,  in  the  first  year  or  two  of  the  movement  here, 
I  was  lecturing  on  this  special  point  to  a  working-man's 
Radical  club  in  London.  Many  present  scarcely  followed 
the  argument,  and  some  of  the  criticism  was  silly  enough. 
But,  by-and-by,  there  arose  a  man  who  threw  some  light 
on  the  discussion.  "  To  me,"  said  he,  "  the  whole  thing 
is  clear  enough.  I  am  a  worker  in  iron.  Iron  comes  into 
our  shop  at  3s.  the  cwt.  I  myself  receive  6s.  a  day  as  my 
wages.  After  I  have  worked  on  the  iron  with  the  machin- 
ery at  my  disposal  for  half-a-day,  what  comes  into  the 
works  at  3s.  a  cwt.  goes  out  at  a  sale  price  of  £1  the  cwt., 
sometimes  more,  sometimes  less.  Put  what  you  please 
down  for  wear  and  tear  of  machinery,  coal,  oil,  lighting, 
&c.,  it  is  evident  that  the  difference  of  14s.  between  what 
the  iron  costs  in  wages  and  raw  material,  namely,  6s.,  and 
the  price  realised,  that  is  £1,  leaves  a  fine  surplus  value 


SURPLUS  VALUE  85 

for  somebody.  I  for  one  shall  see  more  plainly  in  future 
how  my  labour  is  filched  from  me." 

This,  indeed,  is  no  exceptional  case;  for,  making  all 
possible  allowance  for  incidental  materials,  wear  and  tear 
and  so  on,  the  cost  of  the  cwt.  of  finished  iron  to  the 
employer  could  not  have  been  more  than  8s.  all  told. 
Here,  therefore,  the  surplus  value  would  be  twelve  shillings, 
and  the  rate  of  unpaid  to  paid  labour  as  12  to  3,  or  just 
4  to  1.  Consequently,  the  worker  was  day  by  day  doing 
four  strokes  of  work  for  others  against  one  for  himself, 
or  for  every  hour  he  worked  for  himself  he  worked  four 
for  others. 

Now  there  are  three  ways  in  which  the  amount  of  surplus 
value  extracted  from  the  workers  may  be  enlarged  by  the 
capitalist: 

1.  By  increasing  the  actual  number  of  hours  that  the 
worker  toils.  Clearly,  assuming  that  the  work  done  is 
equally  good  —  as  it  is,  up  to  a  certain  point  —  and  that 
the  capitalist  is  quite  indifferent  to  the  health  of  his  wage- 
earner,  as  he  nearly  always  is,  knowing  that  there  are 
plenty  more  where  he  came  from :  on  these  assumptions 
and  within  certain  limits,  the  longer  the  hours,  the  greater 
the  quantity  of  unpaid  labour,  the  larger  the  amount  of 
surplus  value  obtained  by  the  employer.  Thus,  if  the 
wage-earner  replaces  the  cost  of  subsistence  as  represented 
by  his  wages  by  working  half-a-day,  when  the  day's  work 
is  eight  hours,  the  employer  gains  four  hours  of  unpaid 
labour  for  the  services  which  he  renders  as  an  organiser  of 
labour ;  he  himself,  that  is,  and  those  who  take  under  him. 
But  now  let  him  extend  the  day's  work  from  eight  to  nine 
hours,  and  he  appropriates  five  hours  of  unpaid  labour  in- 
stead of  four.     Let  him  protract  the  day's  work  still  fur- 


86  THE  ECONOMICS  OF  SOCIALISM 

ther  to  ten  hours,  and  he  has  six  hours  of  unpaid  labour  to 
the  good  instead  of  either  five  or  four. 

Consequently,  all  through  the  capitalist  period,  it  is 
found  that  employers  have  been  invariably  anxious  to  in- 
crease the  number  of  hours  in  the  working-days;  and  have 
bitterly  resented  any  attempt  to  restrict  the  hours  as  an 
injustice  not  only  to  themselves,  but  to  the  community  at 
large.  Such  extension  of  the  hours  of  labour  is,  within 
certain  limitations,  an  absolute  increase  of  surplus  value 
in  every  case. 

2.  But  there  is  another  way  in  which  the  same  result 
may  be  brought  about.  The  result,  namely,  that  the  quan- 
tity of  unpaid  labour  appropriated  by  the  capitalist  is  in- 
creased in  comparison  with  the  paid  labour  of  the  wage- 
earner.  This  is  by  the  reduction  of  the  cost  of  his  stand- 
ard of  life,  as  measured  by  the  amount  of  social  labour 
necessary  to  produce  it  or  embodied  in  it.  Which  again  is 
to  express  the  reduction  of  its  money-value.  For  example, 
the  standard  of  life  for  a  particular  section  of  wage- 
earners  is  represented  by,  say,  six  shillings  a  day.  Let  us 
now  suppose  that  bread,  bacon,  clothing,  rent,  &c.,  fall 
to  such  an  extent  that  five  shillings  will  purchase  as  much 
as  six  shillings  did  a  little  while  before.  Then,  competi- 
tion and  otber  circumstances  remaining  the  same,  the 
workers  will  be  as  content  with  five  shillings  a  day  as  they 
were  previously  with  six  shillings.  The  cost  of  production 
of  their  labour-power  has  fallen  to  that  level,  and  competi- 
tion will  bring  dovni  their  wages  in  like  manner.  Con- 
sequently, in  this  case,  the  employer  who  before  got  four 
hours  unpaid  labour  out  of  a  total  labour  day  of  eight 
hours,  the  worker  replacing  his  wages  in  four  hours  out 
of  the  eight  —  this  same  employer,  I  say,  will  now  ap- 
propriate upwards  of  four-and-a-half  hours  of  unpaid  la- 


SURPLUS  VALUE  87 

hour  instead  of  four,  seeing  that  the  worker  replaces  his 
five  shillings  in  wages  in  the  first  three-and-a-half  hours' 
work  instead  of  four. 

This  was  the  reason,  and  not  any  philanthropic  motive, 
which  induced  the  capitalists  of  Great  Britain  to  agitate 
so  desperately  for  free-trade  in  food-stuffs  as  against  the 
cry  of  the  advanced  Chartists  for  nationalisation  of  land 
and  machinery.  Cheaper  food  meant  and  means  additional 
hours  of  unpaid  labour  to  the  employers  of  Lancashire  and 
Yorkshire.  The  other  incidental  advantages  of  free  trade 
they  cared  nothing  about. 

3.  The  third  manner  in  which  surplus  value  may  be 
and  is  increased  is  purely  relative.  That  is  to  say,  the 
number  of  hours  worked  remaining  the  same,  and  the 
standard  of  life  or  wages  continuing  unaltered,  a  change 
in  the  conditions  of  labour  may  bring  about  the  same 
pleasing  result,  in  the  shape  of  increased  surplus  value, 
to  the  capitalist.  This  means  that  the  rapidity  and  effi- 
ciency of  the  machinery  is  increased,  and  more  work  is  thus 
compressed  into  the  same  number  of  hours.  Suppose,  now, 
that  the  day's  wages  remain  at  six  shillings,  but  the  speed 
of  the  machinery  is  increased  fifty  per  cent.  What  hap- 
pens? This:  that  it  only  takes  the  worker  two-thirds  of 
the  number  of  hours  that  it  did  before  to  replace  the 
value  of  his  wages.  Taking  the  day's  work  still  at  eight 
hours;  instead  of  four  hours  being  required  to  replace 
the  worker's  wages,  two  and  two-third  hours  only  are 
needed  to  do  this,  and  the  capitalist  takes  more  than  five 
hours  of  unpaid  labour  out  of  the  eight  instead  of  four. 

Such  intensification  of  labour  by  improved  machinery, 
like  the  extension  of  the  working-day,  can  only  be  carried 
on,  profitably  to  the  employer,  up  to  a  certain  point.  Be- 
yond that  point  exhaustion  of  the  "  hands  "  begins,  and  the 


88  THE  ECONOMICS  OF  SOCIALISM 

capitalist  loses  in  breakages  and  bad  output  what  he  ap- 
parently gains  by  greater  speed. 

It  is  needless  to  speak  here  of  adulteration  and  short 
measure,  as  a  means  of  increasing  surplus  value.  That  is, 
of  course,  merely  a  common  fraud,  which,  though  con- 
sidered by  capitalists  of  the  highest  moral  character  only 
"  a  legitimate  form  of  competition,"  is  no  better  than 
cheating  at  cards,  uttering  false  coin  or  bank-notes,  forg- 
ing cheques,  or  any  other  kind  of  recognised,  but  illegal, 
swindling.  That  nearly  all  goods  produced  for  profit  to- 
day should  be  adulterated  is  a  measure  of  the  utility  of 
the  capitalist  system  of  production.  With  its  morality  I 
have  nothing  to  do. 

Labour-power  is  thus,  as  we  have  seen,  sold  like  other 
commodities  on  the  market,  its  value  being  regulated, 
similarly  to  theirs,  by  the  amount  of  social  labour  em- 
bodied in  the  cost  of  its  production,  which  in  this  case 
is  the  total  subsistence  of  its  possessor.  Moreover,  the 
value  of  labour-power  is  also  determined  not  directly  but 
indirectly,  and  the  equivalence  of  the  exchange  is  arrived 
at  by  competition  and  the  higgling  of  the  market. 

Hence,  though  the  value  of  labour-power  to  its  possessor 
is  settled  in  its  respective  grades  by  the  cost  of  produc- 
tion, it  is  also  subject  to  fluctuations  —  that  is,  wages  in 
the  same  trade  may  rise  or  fall  —  according  to  the  supply 
or  demand  of  this  special  value-creating  commodity  at 
different  times. 

It  is  the  special  object  of  trade  unions  to  maintain  the 
rate  of  wages  in  each  trade,  whatever  may  happen,  at  such 
a  level  that,  when  in  employment,  the  worker  is  at  least 
sure  of  getting  a  decent  subsistence.  But,  in  spite  of  all 
their  efforts,  the  influence  of  this  cause  in  determining 
wages  is  severely  felt.     Ever  since  the  capitalist  method 


SURPLUS  VALUE  89 

of  production  became  dominant,  and  even  for  some  time 
previously,  as  the  system  of  production  for  profit  gained 
strength,  a  large  fringe  of  unemployed,  or  casual,  labour 
has  been  an  inevitable  necessity.  The  ups  and  downs  of 
trade,  the  causes  of  which  I  shall  examine  later;  the  con- 
tinuous introduction  of  improved  machinery  and  chemical 
inventions,  lessening  the  number  of  "  hands  "  needed  to 
produce  a  given  amount  of  commodities, —  have  resulted  in 
an  almost  permanent  over-supply  of  labour-power  on  offer 
in  all  civilised  countries,  save  during  periods  of  excep- 
tional prosperity. 

As  a  result,  there  is  frequently  weighing  upon  this  par- 
ticular market  a  mass  of  more  or  less  dimensions  of  un- 
sold labour-power,  ready  to  be  absorbed  in  periods  of 
great  inflation  for  the  profit  of  the  capitalist  class,  but 
thrown  out  again  into  worklessness  and  starvation  for  its 
owners  on  the  first  recurrence  of  stagnation.  All  the  phe- 
nomena of  demand  and  supply  in  relation  to  other  com- 
modities, glut  and  scarcity,  low  prices  and  high,  are  to  be 
seen  in  relation  to  labour-power:  the  only  difference  being 
that  this  commodity  happens  to  be  incorporated  in  flesh- 
and-blood,  which,  as  before  remarked,  makes  the  necessity 
for  its  daily  sale  by  so  much  the  more  pressing. 

Eeference  has  been  made  above  to  the  relation  which 
paid  labour  bears  to  unpaid  labour  in  one  or  two  special 
cases,  and  how  changes  are  made  in  favour  of  the  capitalist 
without  any  important  alteration  in  the  method  of  pro- 
duction itself.  Now,  in  producing  any  manufactured  com- 
modity, it  appears  that  there  are  generally  the  following 
necessary  constituents  to  be  bought  and  expended  by  the 
capitalist:  raw  materials,  incidental  materials,  and,  lastly, 
labour-power.  To  these  must  be  added  the  wear-and-tear 
and  deterioration  of  machinery:  such  deterioration  being 


90  THE  ECONOMICS  OF  SOCIALISM 

due,  not  merely  to  time  and  use,  but  to  relative  inferiority, 
owing  to  the  introduction  of  better  machines  of  which 
account  must  be  taken. 

The  value  of  raw  materials,  however,  as  value,  neither 
increases  nor  diminishes  during  the  course  of  the  manufac- 
turing process. 

The  value,  the  social  labour  value,  that  is,  embodied  in 
the  raw  cotton,  wool,  leather,  iron  or  other  material  bought 
by  the  capitalist  on  the  market  reappears  as  the  same  value 
and  no  more  in  the  finished  commodity.  It  is  a  constant 
quantity  throughout  the  whole  process  from  first  to  last. 

The  value  of  the  incidental  materials  likewise  makes  its 
appearance  again  in  the  finished  commodity,  neither  in- 
creasing nor  diminishing  in  value  during  the  operation. 
The  value  of  the  oil,  gas,  coal,  etc.,  used  up  in  manufactur- 
ing the  raw  materials  is  embodied  at  their  cost  in  the 
finished  commodity.     So  much  and  no  more. 

So,  also,  with  the  value  of  the  machinery:  this  finds  its 
way,  whether  in  ten  years,  fifteen  years,  or  more,  into  the 
commodities,  but  of  itself  creates  no  additional  value  what- 
ever during  the  process.  The  wear-and-tear  reckoned  at, 
say,  10  per  cent.,  represents  the  gradual  incorporation  of 
the  value  of  the  machinery  in  the  finished  product.  But 
this,  too,  is  a  constant  value,  which  neither  expands  nor 
contracts  during  the  period  of  its  absorption  in  the  com- 
modities produced. 

All  these  three  portions  of  the  total  value  may  there- 
fore be  classed  as  constant  capital:  that  portion  of  the 
capital,  namely,  whose  value  remains  the  same  at  the  end 
of  the  process  that  it  did  at  the  beginning.  With  the 
cotton,  the  wool,  the  iron,  the  leather,  the  form  is  changed; 
but  the  vahie  of  the  raw  material,  to  start  with,  remains 
the  value  of  the  raw  material  in  the  finished  commodity 


SUEPLUS  VALUE  91 

—  in  the  yarn,  or  the  cloth,  or  the  boots,  or  the  finished 
iron. 

But  now,  lastly,  we  come  to  the  labour-power  purchased. 
Here  the  case  is  different.  Not  only  does  the  value  of  the 
labour-power,  its  cost  in  wages  to  the  capitalist,  appear  in 
the  finished  commodity,  but  an  additional  value  as  well. 
This  particular  material,  labour-power,  does,  in  function- 
ing, give  off  to  the  finished  commodity  more  value  during 
the  process  of  production  than  its  cost,  to  start  with,  rep- 
resents. It  is  not  a  constant  but  a  variable  form  of  the 
capital  employed.  It  reproduces  its  own  value  and  a  sur- 
plus value  as  well,  which  costs  the  original  seller  of  tlie 
labour-power  toil  and  expenditure  of  vitality,  but  costs  the 
capitalist  nothing. 

Splitting  up  any  finished  commodity  into  its  component 
parts  or  value,  we  have,  therefore: 

Constant  Capital  —  The  value  of  raw  materials,  inci- 
dental materials,  wear-and-tear,  etc. 

Variable  Capital  —  Wages  paid  to  work-people. 

Surplus  Value  —  The  value  added  during  process  of 
manufacture  by  the  unpaid  labour  of  the  workers, 
after  they  have  replaced  their  wages  by  labour-value 
embodied  in  the  commodities  which  they  produce. 

I  give  Marx's  own  illustration  of  how  this  works  out  in 
relation  to  a  cotton  factory,  although  the  figures  are  very 
different  indeed  from  those  of  to-day : 

"  First,  we  will  take  the  case  of  a  spinning  mill  con- 
taining 10,000  mule  spindles,  spinning  No.  32  yarn  from 
American  cotton,  and  producing  1  pound  of  yarn  weekly 
per  spindle.  We  assume  the  waste  to  be  6  per  cent. 
Under  these  circumstances  10,600  pounds  of  cotton  are 


92  THE  ECONOMICS  OP  SOCIALISM 

consumed  weekly,  of  which  600  pounds  go  to  waste.  The 
price  of  the  cotton  in  April,  1871,  was  7%d.  per  pound; 
the  raw  material,  therefore,  costs  in  round  numbers  £342. 
The  10,000  spindles,  including  preparation-machinery  and 
motive-power,  cost,  we  will  assume,  £1  per  spindle,  amount- 
ing to  a  total  of  £10,000.  The  wear-and-tear  we  put  at 
10  per  cent.,  or  £1,000  yearly  —  equal  to  £20  weekly. 
The  rent  of  the  building  we  suppose  to  be  £300  a  year, 
or  £6  a  week.  Coal  consumed  (for  100  horse-power  indi- 
cated, at  4  pounds  of  coal  per  horse-power  per  hour  during 
60  hours,  and  inclusive  of  that  consumed  in  heating  the 
mill),  11  tons  a  week  at  8s.  6d.  a  ton,  amounts  to  about 
£41/^  a  week;  gas,  £1  a  week;  oil,  etc.,  £4i/^  a  week.  Total 
cost  of  the  above  auxiliary  materials  £10  weekly.  There- 
fore, the  constant  portion  of  the  value  of  the  week's  prod- 
uct is  £378.  Wages  amount  to  £52  a  week.  The  price  of 
the  yarn  is  12i/4d.  per  pound,  which  gives  for  the  value  of 
10,000  pounds  the  sum  of  £510.  The  surplus  value  is 
therefore,  in  this  case,  £510  —  £430  =  £80.  We  put  the 
constant  part  of  the  value  of  the  product  =  0,  as  it  plays 
no  part  in  the  creation  of  value.  There  remains  £132  as 
the  weekly  value  created,  which  =  £52  var.  £80  surpl. 
The  rate  of  surplus-value  is,  therefore,  ^%2  =  153%  per 
cent.  In  a  working-day  of  10  hours  with  average  labour 
the  result  is :  necessary  labour  =  SWss  hours,  and  surplus 
labour  =  6%3." 

When  once  this  division  of  industrial  capital  into  con- 
stant capital,  variable  capital  and  surplus  value  is  grasped, 
the  second  great  step  is  taken  in  the  analysis  of  the  capital- 
ist system.  It  is  indeed  easy  to  apply  the  formula  in  all 
trades.  The  only  portion  of  the  theory  which  is  at  all 
difficult  to  understand,  by  those  who  have  already  mastered 
what  value  is,  consists  in  the  manner  in  which  machinery 


SURPLUS  VALUE  93 

contributes  its  share  of  value  to  the  product.  Improved 
machinery  so  obviously  enables  its  possessor  to  get  the 
better  of  competitors,  in  the  rough-and-tumble  of  mer- 
cantile strife,  that  many  think  the  new  machinery  itself 
contributes  greater  value  to  the  commodity  than  the  old 
appliances.  Of  course,  precisely  the  opposite  is  true.  I 
mean  that  improved  machinery,  by  enabling  commodities 
to  be  produced  with  a  less  expenditure  of  social  human 
labour  than  was  previously  necessary,  tends  to  reduce  the 
relatfve  value  of  similar  commodities  put  on  the  market, 
with  the  aid  of  this  machinery,  or  without  it,  below  the 
former  level. 

The  only  value  which  the  machinery  adds  to  the  com- 
modity during  the  process  of  manufacture  is,  therefore, 
as  said  above,  the  value  of  its  own  deperishment,  with  the 
cost  of  repairs  and  so  on.  This  does  not  take  place  all  at 
once,  but  is  spread  over  a  term  of  years.  So  that  a  large 
portion  of  the  value  of  machinery,  which  has  been  for 
any  length  of  time  in  use,  is  actually  circulating  in  the 
form  of  commodities,  or  has  been  worn  out,  with  the  wear- 
ing-out, or  consumption,  of  those  commodities,  although 
the  machinery  itself  may  still  be  clanking  away  in  its  old 
habitation  to  the  old  familiar  tune.  The  actual  physical 
deterioration,  in  addition  to  its  moral  and  material  deteri- 
oration, relatively  to  other  still  better  machinery  since 
introduced,  has  been  represented  in  the  exchange  value  of 
the  commodities  as  they  were  thrown  upon  the  market. 
True,  its  form  is  fixed,  but  its  spirit  —  in  the  shape  of  its 
value  —  has  to  some  extent  flitted  away,  and  has  gone  into 
the  commodities  which  it  has  been  partly  instrumental  in 
producing. 

The  machinery  itself  and  all  the  improvements  which 
can  be  made  in  it  are  also  directly  social  products.     But 


94  THE  ECONOMICS  OF  SOCIALISM 

for  the  work,  the  discoveries,  the  inventions  of  countless 
generations  of  human  beings,  not  a  single  improvement  of 
the  many  on  which  our  present  society  plumes  itself  could 
have  been  made.  Nay,  more,  unless  society  were  in  a  con- 
dition to  take  advantage  of  the  modification  in  the  method 
the  improvement  would  itself  be  useless.  Steam,  elec- 
tricity, artificial  manure,  automatic  machinery,  machine- 
making  machines  are  all  of  them  as  much  social  products 
as  the  commodities  produced  with  a  view  to  profit  and 
placed  upon  the  market  for  exchange. 

The  private  ownership  of  capital,  in  the  shape  of  the 
means  and  instruments  of  production  and  distribution  is 
also,  as  we  have  seen,  as  much  the  result  of  a  long  series 
of  historic  and  economic  developments  as  the  private 
ownership  of  the  soil.  These  developments  have  resulted 
in  an  intricate  network  of  social  conventions,  based  upon 
class  appropriation  and  ownership,  by  reason  of  which  the 
members  of  certain  classes  possess  everything  as  individuals, 
and  the  members  of  the  other,  the  wage-earning  class, 
possess  nothing  but  their  labour-power.  This  social  cleav- 
age once  effected,  all  the  discoveries,  inventions  and  im- 
provements, no  matter  by  whom  they  were  made,  go  into 
the  po^ -ession  not  of  the  community  but  of  the  capitalist 
class,  ^hey  belong,  henceforth,  to  individuals  or  groups 
of  that  class,  to  the  exclusion  of  the  working-class  alto- 
gether. This  has  been  going  on  for  so  long  that  the  ar- 
rangement seems  not  only  legal,  which  the  dominant  class 
has  taken  good  care  to  make  it,  but  natural,  proper  and 
inevitable.  These  discoveries,  inventions  and  improve- 
ments, therefore,  become  the  property  of  the  purchasers  of 
labour-power,  and  are  used  by  them  against  those  who  own 
this  labour-power  as  their  sole  available  commodity. 

The  capitalists  use  this  advance  of  society,  due  to  in- 


SURPLUS  VALUE  95 

dividuals  who  are  themselves  the  product  of  that  society, 
and  who  owe  their  faculties  to  their  begettings  and  sur- 
roundings from  birth,  to  repress  the  demand  of  the  work- 
ers for  better  conditions  of  life;  at  the  same  time  that, 
in  the  majority  of  eases  they  take  good  care  to  deprive  even 
the  discoverers  and  inventors  of  any  considerable  share  of 
the  profits  reaped  by  their  aid.  Thus  it  comes  about,  for 
example,  that  when  the  wage-earners,  owing  to  any  cause, 
obtain  some  considerable  increase  of  their  wages,  involv- 
ing a  rise  in  their  standard  of  life,  labour-saving  machines, 
or  inventions,  are  adopted  which  render  superfluous  a  cer- 
tain number  of  the  workers,  and  turn  them  into  necessitous 
competitors  for  employment  with  those  who  still  remain 
at  work. 

Such  improvements  in  our  progressive  society  are  al- 
ways at  hand  and  awaiting  acceptance  by  the  dominant 
class  of  our  day.  But  the  object  of  that  class  is  not  to 
save  expenditure  of  labour,  not  to  produce  more  useful 
articles  with  less  of  toil  for  the  working  community.  Xot 
at  all.  Their  sole  and  only  object  is  to  increase  the  quan- 
tity of  labour-value  which  they  can  appropriate  without 
paying  for  it:  to  enhance  their  total  profit,  that  is  to  say. 
Consequently,  if  wages  are  sufficiently  low  in  proportion  to 
the  total  labour-value  produced  in  any  department  of  in- 
dustry to  satisfy  the  capitalist  cla.>s  engaged  in  that  trade, 
no  employer  will  think  of  "  locking  up  his  capital "  in 
improved  machinery.  He  prefers  the  simpler  plan  of  ex- 
torting surplus  value  out  of  the  underpaid  hands  at  his 
command.  In  this  he  may  calculate  correctly  enough, 
seeing  that  his  sole  end  and  aim,  like  that  of  other  em- 
ployers, is  not  to  save  labour,  or  to  economise  toil,  but  to 
save  wages  and  economise  his  own  individual  expenditure: 
this  as  compared  with  the  amount  of  commodities  or  in- 


96  THE  ECONOMICS  OF  SOCIALISM 

corporated  social  labour-value  which  he  appropriates,  leav- 
ing so  much  more  surplus  value  to  him. 

Hence  it  happens  that  the  capitalist  system  of  produc- 
tion, in  its  greed  for  surplus  value,  not  unfrequently  heads 
back  progress.  And  we  have  seen,  in  such  examples  as  the 
nail-makers  of  Cradley  Heath,  the  brickmakers  of  Staf- 
fordshire, and  elsewhere,  the  using  of  women  to  tug  barges 
along  canals,  that  the  introduction  of  improved  machinery 
is  positively  fought  against  and  resisted  by  the  extremely 
low  wages  paid,  the  long  hours  worked,  and  the  using  up 
of  the  workers  as  mere  food  for  profit-making. 

Now,  if  surplus  value  were  extracted  only  out  of  grown 
men,  the  resistance  which  might  be  experienced  would  tend 
at  times  to  become  dangerous.  But  capitalist  arrange- 
ments at  first  made  full  provision  against  that.  During 
the  period  of  the  complete  and  unrestrained  domination  of 
the  profit-making  system,  women  and  children  were  brought 
in  to  aid  improved  machinery  in  keeping  the  demands  of 
the  workers  within  what  employers  chose  to  consider  were 
reasonable  limits  —  limits,  namely,  that  coincided  with 
what  they  regarded  as  the  appropriation  by  themselves  of 
satisfactory  quantities  of  surplus  value. 

But  the  effect  of  the  introduction  of  women's  and  chil- 
dren's labour-power  into  the  market  in  competition  with 
that  of  the  men  was  two-fold.  In  the  first  place,  they 
were  more  docile  and  less  apt  —  in  the  case  of  the  chil- 
dren, practically  unable  —  to  complain  of  excessive  toil ; 
thus  affording  to  the  capitalist  a  supply  of  his  most  im- 
portant commodity  under  exceedingly  favourable  condi- 
tions for  him. 

In  the  second  place,  the  employer  was  in  this  way  pro- 
vided with  the  most  convenient  engine  of  competition  to 
keep  down  his  wages-sheet  that  could  possibly  be.     For, 


SURPLUS  VALUE  97 

under  the  law  which  regulates  the  rate  of  wages,  or  stand- 
ard of  life,  in  any  trade,  a  man  earns  the  usual  wage  in  that 
trade;  such  wage  being  taken  to  cover  his  own  subsistence 
and  that  of  his  family.  But  when  his  wife  and  children 
are  brought  into  the  market  also,  with  their  labour-power 
likewise  pressed  for  sale,  then  competition  reduces  the 
average  wage  of  the  whole  family  to  the  point  which  would 
have  been  the  wage  of  the  man  alone. 

Thus,  apart  altogether  from  the  mischief  done  to  the 
community  by  the  overwork  of  women  and  children  — 
mischief  going  on  at  this  day,  and  by  no  means  wholly 
remedied,  as  some  think,  by  the  Factor}-  Acts  —  apart 
from  this,  I  say,  a  man's  foes  become  literally  they  of  his 
own  household.  Although,  of  course,  this  was  not  dis- 
cerned at  first,  and  too  often  is  not  seen  now  by  the  work- 
ers themselves.  Yet,  whether  they  see  it  or  not,  the  more 
strict  organisation  of  labour,  which  the  capitalist  class  has 
been  and  is  thus  able  to  secure,  and  the  increased  compe- 
tition arising  from  this  cause,  tend  to  depress  the  eco- 
nomic status  of  the  men,  in  spite  of  the  apparent  gain  of 
the  wife's  and  children's  wages  at  the  end  of  the  week. 

Throughout  all  this  period  of  perfect  personal  freedom, 
which,  as  will  be  seen  here  and  later,  it  is  so  difficult  to 
distinguish  from  competitive  anarchy,  the  labourer  uses 
his  labour-power  as  a  commodity  to  be  exchanged  like  any 
other  commodity,  at  the  cost  of  the  quantity  of  labour  em- 
bodied in  its  production  —  food,  clothing,  house-room,  &c. 

To  the  capitalist  engaged  in  the  process  of  production , 
this  same  labour-power  represents  only  one  of  the  elements 
of  the  productive  process,  and  is  that  one  of  those  ele- 
ments out  of  which  he  squeezes  his  surplus  value :  the  mar- 
gin of  value  from  which  he  derives  his  own  personal  profit 
after  dividing  with  others  who  participate. 


98  THE  ECONOMICS  OF  SOCIALISM 

Here  we  can  see  at  once  how  absurd  it  is  of  Adam  Smith, 
and  those  who  follow  him,  to  speak  of  the  wage  of  the 
labourer  as  part  of  the  income  derived  from  production,  the 
share  of  the  labourer  in  the  joint  work  with  his  partner 
the  capitalist.  It  is  nothing  of  the  sort.  The  labourer's 
wage  is  the  purchase  consideration  paid  for  the  labourer's 
sole  and  only  commodity,  labour-power,  without  which  the 
employer  would  be  wholly  unable  to  make  his  capital 
fructify  and  engender  surplus  value.  Adam  Smith  him- 
self, in  a  way,  contradicts  his  own  statement  when,  else- 
where, he  declares  that  employers  are  in  a  continual  con- 
spiracy to  keep  down  the  rate  of  wages. 

Out  of  this  surplus  value  and  its  concomitant  arrange- 
ments a  bitter  class  antagonism  necessarily  springs. 
From  the  earliest  days  of  the  development  of  machinery, 
and  more  especially  during  the  period  of  the  growth  of 
the  great  factory  industry,  the  workers  were  conscious  that 
these  new  powers  were  being  used  to  render  them  more  de- 
pendent upon  the  dominant  class,  to  shake  the  continuity 
and  security  of  their  employment,  and  to  reduce  the  rate 
of  wages  in  all  well-paid  employments  —  such  as  that  of 
the  weavers  prior  to  the  introduction  of  the  power-loom. 
But,  unfortunately,  they  attacked,  in  many  cases,  the  ma- 
chines themselves,  or  struck  against  their  employers  at 
great  disadvantage.  The  class  war  brought  about  by  eco- 
nomic causes  existed  still,  and  possessors  of  the  labour- 
power  which  the  capitalist  was  compelled  to  buy  were 
continuously  at  tlie  mercy  of  the  owners  of  the  means  and 
instruments  of  production. 

By  slow  degrees,  conscious  interference  took  the  place  of 
unconscious  revolt,  not  with  a  view  to  reduce  the  quantity 
of  surplus  value  appropriated  by  the  capitalist  class,  but  on 


SUEPLUS  VALUE  99 

ethical  grounds  and  in  order  to  save  the  people  from  per- 
manent deterioration. 

Nevertheless,  protection  of  women  and  children  has  so 
far  been  quite  half-hearted;  shorter  hours  have  been  ac- 
cepted more  because  it  is  not  economical  with  the  best 
machinery  to  work  longer,  and  because  of  the  growing 
power  of  working-class  combinations,  than  from  any  con- 
sideration for  the  well-being  of  the  hands.  To-day  as 
throughout  its  history  capital  has  no  ethic.  It  accepts 
sullenly  and  after  bitter  resistance  any  restriction  whatever 
upon  its  inherent  right  to  buy  in  the  cheapest  and  sell  in  the 
dearest  market,  irrespective  of  any  consideration  other  than 
pecuniary  gain.  That  labour-power  happens  to  be  em- 
bodied in  human  creatures,  and  cannot  be  bought  without 
taking  them  over  at  the  same  time,  is  for  the  capitalists 
an  inconvenient  accident. 

It  is  clear  that  to  the  workers  as  a  class  it  is  of  little 
importance  how  the  amount  paid  to  them  for  subsistence 
is  divided  up.  No  doubt,  it  made  a  great  deal  of  differ- 
ence to  the  individual  worker  and  to  his  wife  and  family 
whether  the  wages  coming  in  at  the  end  of  the  week  were 
represented  by  the  sum  of  9s.  or  10s.  formerly  paid  to  the 
agricultural  labourer  of  Dorsetshire  or  Wiltshire  for  his 
hard  but  inefficient  toil ;  or  whether  they  were  represented 
by  the  sum  of  30s.  to  50s.  paid  to  the  stalwart  navvy,  or 
gasworker,  or  engineer,  or  skilled  compositor,  or  electrician 
for  their  vigorous  toil  or  highly-trained  manipulation.  So 
far  the  late  Mr.  Cliffe  Leslie,  who  paid  special  attention 
to  the  grouping  of  workers  in  the  scale  of  payments,  was 
quite  right  when  he  wrote  to  me  many  years  ago  that 
"averages  in  such  matters  are  quite  unscientific  and  illu- 
sory." 


100  THE  ECONOMICS  OP  SOCIALISM 

To  strike  an  average  between  such  rates  of  payment  as 
those  given  above,  and  take  that  as  the  average  wage  of 
the  English  worker,  would  be  absurd  indeed,  if  it  were 
proposed  in  that  way  to  give  an  accurate  idea  of  the  posi- 
tion of  the  working  community  in  these  islands.  But 
from  the  point  of  view  of  the  workers  as  a  whole,  though 
some  are  much  better  off  than  others,  they  are  so  only  as 
the  slaves  of  ancient  days,  who  were  specially  useful  in 
contributing  to  the  immediate  luxuries  or  vices  of  their 
masters,  were  better-fed,  clothed  and  lodged  than  the 
wretches  who  were  flogged  at  their  daily  tasks  in  the  fields 
or  in  the  mines.  The  economic  and  social  relations  remain 
much  the  same  in  both  cases :  the  quantity  of  surplus  value 
extracted  varies  very  little :  the  uncertainty  of  good  treat- 
ment in  the  case  of  the  slave,  or  of  continuous  employ- 
ment in  the  case  of  the  wage-earner,  is  as  great  as  ever: 
the  provision  for  old  age,  all  circumstances  being  taken  into 
consideration,  is  not  materially  altered  for  the  better,  in 
spite  of  the  miserable  Old  Age  Pension  dole,  which  has 
been  acorded  to  workers  over  70  years  of  age  —  practically 
in  relief  of  Poor  Rates. 

Moreover,  at  the  present  time,  the  extension  of  machinery 
in  every  department  is  tending,  not  only  to  displace  men 
by  women  in  many  branches  of  industry  and  to  increase 
uncertainty  of  employment,  thus  swelling  the  numbers  of 
the  permanently  unemployed;  but  is  also  tending  to  re- 
duce the  workers  more  and  more  to  one  dead  level  of  mere 
attendants  on  the  new  machines  introduced.  Hence  it 
arises,  that  of  late  years  the  trade  unionists,  who  so  long 
considered  themselves  and  were  regarded  by  others  as  "  the 
aristocracy  of  labour,"  have  been  compelled  to  take  a  wider 
view  of  the  class  war,  and  to  recognise  that  even  they, 
whatever  minor  advantages  they  may  secure  by  combina- 


SUEPLUS  VALUE  101 

tion,  are  by  no  means  adequately  protected  against  the 
levelling  advance  of  machinery,  or  assured  against  long 
periods  of  short  time  or  worklessness,  due  to  commercial 
and  financial  crises  over  which  they  have  no  control.  They 
are,  in  fact,  no  better  than  food  for  surplus  value  like  the 
rest  of  their  class.  They,  like  the  rest,  are  a  mere  mass 
of  human  labour-power,  embodied  in  flesh-and-blood,  at 
the  mercy  of  the  class  which  controls  the  great  forces  of 
modern  society. 

So,  again,  with  regard  to  the  rise  of  wages.  It  cannot 
be  disputed  that,  in  the  great  majority  of  industries,  the 
rates  of  wages  paid  to  men  and  women  when  in  employ- 
ment have  considerably  increased.  This  is  certainly  true 
in  the  United  Kingdom,  and  applies  also  in  great  degree 
to  the  continent  of  Europe.  It  is  true,  also,  that  this  rep- 
resents to  the  wage-earners  while  in  work  a  somewhat 
higher  standard  of  life  than  they  obtained  prior  to  the  war. 
But  here  again,  taking  the  largest  increment  possible,  it  is 
questionable  whether  even  this  has  compensated  the  work- 
ers for  the  periods  of  worklessness,  or  short  hours  worked, 
in  many  trades,  or  for  the  long  weeks  out  on  strike,  to  get 
or  maintain  the  advances  spoken  of. 

In  any  case,  the  advantages  secured  by  the  producers  in 
the  shape  of  a  higher  standard  of  life  are  altogether  out 
of  proportion  to  the  increase  in  the  powers  to  produce 
wealth  now  at  the  disposal  of  mankind.  These  powers 
have  increased  in  modern  times  to  an  extent  far  beyond 
that  of  which  there  is  any  record.  It  would  certainly  ap- 
pear, therefore,  that  those  who  argue  that  wages  should  be 
lowered  in  order  to  meet  foreign  competition;  that  the 
workers  ought  to  emigrate,  cease  to  marry,  or  in  any  way 
to  propagate  their  species  because  population  grows  too 
fast  for  subsistence;  and  that  the  only  way  in  which  trad- 


102  THE  ECONOMICS  OF  SOCIALISM 

ing  and  commercial  prosperity  can  be  maintained  is  by 
overwork  at  home  and  spoliation  abroad  —  that  the  wise- 
acres who  argue  after  this  fashion,  I  say,  might  reasonably 
have  their  attention  called  to  such  facts  as  that  (1)  four 
men  working  on  the  land  in  the  west  of  America  can  pro- 
duce enough  food  in  a  year  to  sustain  1,000  people  for 
the  like  period,  and  .that  (2)  one  woman  working  at  a 
loom  in  a  factory  can  weave  in  a  twelve-month  enough 
cloth  to  clothe  at  least  100  people.  In  the  face  of  such 
facts  as  these,  to  speak  of  over-population  as  the  cause  of 
poverty,  or  to  demand  reduced  wages  as  a  remedy  for  bad 
trade,  is  a  sort  of  reasoning  too  monstrously  absurd  even 
for  the  most  greedy  appropriators  of  unpaid  labour  to  use 
honestly. 

Surplus  value,  with  the  acquisition  of  profit,  being  the 
sole  end  and  aim  of  the  capitalist  system;  and  payment 
of  wages  by  way  of  purchase  of  free  labour-power  being 
the  only  means  by  which  this  end  can  be  attained:  it  fol- 
lows that  so  long  as  the  capitalist  system  endures  so  long 
must  the  appropriation  of  unpaid  labour  by  the  capitalist 
class  continue ;  so  long  must  there  be  a  margin  of  unem- 
ployed at  hand,  to  restrain  the  demands  of  those  who  are 
at  work,  and  ready  to  be  absorbed  in  periods  of  prosperity ; 
so  long  must  wages  on  the  average  in  every  trade  be  no 
more  than  the  subsistence  rate  customary  in  that  trade 
regulated  by  competition;  and  so  long,  in  short,  must  the 
workers  be,  in  all  but  name,  the  slaves  of  the  owners  of 
the  capital  and  the  land. 

From  this  we  can  learn  the  comparatively  small  worth 
of  mere  palliatives.  Sanitary  factories,  liability  of  em- 
ployers for  injury  to  workmen,  restriction  of  the  age  at 
which  children  may  work,  limitation  of  dangerous  or  un- 
healthy trades,  even  an  eight-hour  law,  or  seven-hour  cus- 


StJEPLUS  VALUE  103 

torn,  each  and  all  of  these  leave  the  basis  of  the  system 
wholly  untouched,  and  the  difficulties  to  which  it  neces- 
sarily leads  practically  unmodified.  The  wage-earners 
may  be  a  trifle  healthier,  a  little  less  liable  to  mutilation, 
not  quite  so  much  overworked,  and  allowed  a  certain 
amount  more  leisure  in  which  to  reflect  upon  the  causes 
of  their  subjection.  But  that  is  the  total  amount  of  ad- 
vantage they  will  gain.  They  will  be  just  as  uncertain  of 
continuous  employment,  just  as  much  liable  to  overwork 
by  increased  rapidity  of  machinery  —  ten  hours'  work 
being  compressed  into  eight,  or  seven  —  and  just  as  little 
capable  of  making  adequate  provision  for  old  age. 

Meanwhile  the  tendency  of  machinery  is  to  bring  all 
labourers  to  one  level.  In  place  of  encouraging  skill  and 
individuality,  the  great  machine  industry  has  the  effect  of 
developing  mere  automatic,  mechanical  toil.  Machines  use 
men  instead  of  men  using  machines.  So  the  surplus-value- 
creating  system  grinds  on,  until  the  same  economic  causes 
which  brought  about  its  development,  having  worked 
through  their  full  cycle,  will  bring  about  also  the  change 
to  the  next  social  stage.  But  at  the  end  of  the  evolution 
of  the  capitalist  period,  as  we  now  are,  the  examination 
of  surplus-value  and  the  manner  in  which  it  is  obtained 
and  appropriated  not  only  affords  the  key  to  what  is  going 
on  around  us,  but  also,  properly  understood,  gives  a  clue 
to  the  synthesis  which  is  the  complement  of  the  analysis. 

We  are  thus  enabled,  in  some  degree  at  least,  to  forecast 
the  coming  period,  when  production  of  commodities  will  be 
carried  on  no  longer  under  the  control  of  a  class,  with  a 
view  to  the  creation  of  surplus-value  and  the  absorption 
of  unpaid  labour  in  the  shape  of  profit,  but  the  production 
of  useful  and  beautiful  articles  wi'l  be  co-operatively  organ- 
ised by  the  whole  community  for  the  benefit  of  all  its  mem- 


104  THE  ECONOMICS  OF  SOCIALISM 

bers,  between  whom  there  will  be  no  class  distinctions,  or 
economic  antagonisms,  whatever. 

To  sum  up: 

All  exchange  is  conducted  on  an  equality  on  the  aver- 
age of  transactions,  and  unequal  exchange  does  not  create 
wealth.     What  one  loses  the  other  gains. 

The  capitalist  who  begins  to  produce  commodities  starts, 
under  existing  conditions,  with  money.  He  buys  all  his 
raw  materials,  incidental  materials,  machinery,  &c.,  on 
the  market  with  this  money.  Having  commenced  his  op- 
erations with  £100,  he  finds  that  he  sells  his  finished  com- 
modities for  £110,  or  £10  more  than  he  had  advanced,  and 
this  was  the  object  which  he  had  in  view  from  the  first. 

Whence  does  this  increase  come? 

(a)  It  does  not  come  from  a  reward  for  his  risk,  as, 
though  one  capitalist  may  risk  being  beaten  in  competition 
with  his  fellow-capitalist,  the  capitalist  class  as  a  whole 
run  no  risk.  Besides,  the  reward  for  risk  must  come 
from  somewhere,  even  supposing  such  reward  there  were. 

(b)  Not  from  the  raw  materials,  incidental  materials, 
&c.,  which  he  buys  at  market  price.  The  value  of  these 
reappears,  including  the  value  of  the  proportional  wear- 
and-tear  of  machinery,  in  the  finished  commodity  without 
change.  They  constitute  constant  capital,  unaffected  as 
to  value  by  the  industrial  process,  and  are  embodied  in  the 
finished  commodity,  unchanged  in  this  respect,  however 
much  the  form  may  have  been  modified. 

(c)  Not,  as  said  before,  by  unequal  exchange,  for  this 
constitutes  no  value. 

The  increase,  therefore,  comes  from  the  capitalist's  last 
purchase,  the  last  commodity  which  he  buys  at  the  market 
rate. 


SURPLUS  VALUE  105 

Now  this  commodity  is  usually  called  labour.  But  it  is 
not  labour  which  the  capitalist  buys  as  a  commodity; 
for  labour  has,  and  can  have,  no  value  in  itself.  It  only 
has  value  when  it  is  embodied  in  articles  of  social  utility, 
relatively  to  other  similar  articles  in  which,  of  course, 
labour  is  likewise  embodied. 

What  the  capitalist  purchases,  therefore,  to  complete  his 
selection  of  commodities  necessary  to  commence  produc- 
tion, is  not  labour,  but  the  power  to  labour,  or  labour- 
power,  that  labour-embodying,  value-creating  capacity 
which  human  beings  possess. 

But  human  beings  must,  by  historic  causes,  be  found  in 
such  a  social  condition  that  they  have  no  other  property, 
no  other  commodity,  at  command,  to  sell,  except  this  force 
of  their  bodies,  this  labour-power  which  the  capitalist 
wants  to  purchase. 

On  the  one  side,  free  labourers,  without  property,  anx- 
ious to  sell  their  sole  commodity,  labour-power,  for  the  day, 
the  week,  the  month,  the  year. 

On  the  other  side,  owners  of  the  means  and  instruments 
of  production  ready  to  buy  this  strange  commodity  which 
they  find  so  conveniently  on  the  market  for  purchase. 

Such  are  the  two  necessary  conditions  of  capitalist  pro- 
duction: without  them  capital  as  a  series  of  social  relations 
cannot  he. 

Tlie  labourers  are  anxious  to  sell  or  exchange  their 
labour-power,  for  unless  they  do  they  must  starve.  And  it 
will  not  keep,  this  commodity  which  they  are  eager  to 
dispose  of.  Consequently,  they  advance  it  on  credit  to  the 
capitalist :  not  getting  the  exchange-value  of  it  until  a  week, 
a  fortnight,  or  a  month  of  work  has  been  done. 

Labour-power  thus  bargained  away  is  exchanged  on  the 


106  THE  ECONOMICS  OF  SOCIALISM 

same  basis  as  any  other  commodity,  namely,  its  cost  of 
production  in  necessary,  abstract,  simple,  social  human 
labour. 

This  means  that  the  possessor  of  the  labour-power  ex- 
changes it  with  the  capitalist  for  such  means  of  subsist- 
ence as  will  keep  him,  according  to  the  standard  of  life 
of  his  trade,  and  enable  him  to  hand  on  the  same  lot  to  his 
offspring. 

This  quantity  of  social  human  labour  embodied  in  his 
standard  of  life  is  also  determined,  like  the  value  of  other 
commodities,  by  competition  and  higgling  of  the  market. 
When,  therefore,  women  and  children  are  brought  in  to 
sell  their  labour-power,  the  whole  household  only  earns 
what  the  head  of  the  family  would  otherwise  earn,  and  the 
apparent  gain  is  illusory. 

Labour-power  thus  bought  at  its  value  in  the  quantity 
of  necessary,  abstract,  simple,  social,  human  labour  em- 
bodied in  its  means  of  production  (namely  the  subsistence 
of  its  owner),  measured  in  money,  is  at  the  disposal  of  the 
capitalist  for  a  fixed  period,  say  a  day. 

But  the  money  value  of  this  labour-power,  the  wages 
paid  to  its  possessor  for  its  use  during  the  day,  only  repre- 
sents a  quarter,  a  third,  a  half  of  a  social  labour  day, 
whatever  its  length  may  be. 

Hence  the  capitalist  receives  back  from  the  worker,  in 
social  labour-value  embodied  in  commodities,  the  total  value 
of  his  wages  before  the  first  three  or  four  hours  of  the  day 
are  over.  But  he  has  the  right,  of  which  he  avails  him- 
self, to  use  the  labour-power  under  the  same  conditions 
for  the  whole  day. 

Consequently  for  every  hour  that  the  labourer  works  for 
himself  to  replace  his  wages,  he  works  one,  two,  three,  or 


SURPLUS  VALUE  107 

even  four  hours  for  the  capitalist  without  any  payment 
whatsoever. 

The  value  thus  appropriated  by  the  employer  for  noth- 
ing constitutes  surplus  value,  which  is  divided  up  among 
the  various  sections  of  the  non-producing  class. 

What  conceals  from  the  workers  at  large  the  method  of 
their  expropriation  is  the  form  of  money  in  which  they  are 
paid  their  wages.  If,  like  chattel  slaves,  they  received  in 
return  for  their  labour  only  so  much  of  the  corn,  or  the 
wine,  or  the  meat,  which  they  themselves  raised  and  pre- 
pared for  their  master,  they  would  be  under  no  delusion 
as  to  the  meaning  of  the  transaction,  however  little  power 
they  might  liave  to  emancipate  themselves  from  their  thral- 
dom. If,  on  the  other  hand,  they  were  villeins  compelled 
to  give  two  or  three  days'  work  in  the  week  to  their  lord 
without  any  payment  whatever ;  in  this  case  also  they  would 
not  imagine,  however  stupid  they  might  be,  that  they  were 
co-partners  with  their  noble  superior  in  tlie  product  of  their 
enforced  husbandry  or  handicraft. 

But  the  fact  that  they  are  perfectly  free,  so  free  that 
they  can  go  wherever  they  please  and  still  possess  nothing, 
so  free  that  they  must  sell  their  labour-power  at  cost  of 
subsistence  to  be  exploited  by  the  possessing  class  —  this 
keeps  their  eyes  blinded,  in  the  great  majority  of  cases,  to 
the  pleasing  social  juggle  which  enables  the  owners  of  the 
means  and  instruments  of  production  to  deprive  them  of 
two-tliirds  or  three-fourths  of  the  value  of  their  day's, 
week's,  or  year's  work  without  paying  anything  for  it. 


CHAPTER  IV 

CIRCULATION   OF   COMMODITIES 

Labourers  must  sell  their  labour-power,  day  by  day,  or 
week  by  week,  in  order  to  exist  as  labourers.  If  they  fail 
to  be  able  to  sell  this,  their  sole  commodity,  regularly  on 
the  market,  they  cease  to  live,  or  have  to  accept  charity  or 
State  aid  in  some  form.  They  are  living  under  a  relent- 
less economic  law,  from  which,  as  individuals,  they  cannot 
possibly  emancipate  themselves.  Possessing  no  wealth,  nor 
any  social  power  to  control  and  subsist  upon  the  products 
of  the  labour  of  others,  they  are  as  much  compelled  to 
place  their  labour-power  at  the  disposal  of  members  of  the 
capitalist  and  landowning  class  as  their  economic  ancestors, 
the  slaves  of  old.  Their  economic  freedom  is  limited  to 
the  right  (not  always  easy  to  exercise)  to  sell  their  labour- 
power  to  another  purchaser  than  the  one  who  had  bought 
it  yesterday.     Anyway,  sell  they  must. 

But  Just  as  the  labourers  are  compelled  by  their  social 
and  economic  status  to  sell  their  labour-power  for  money, 
in  order  merely  to  exist  as  labourers,  so  must  the  capi- 
talists sell  their  commodities  on  the  market  for  money,  in 
order  merely  to  exist  as  capitalists.  They  have  no  choice 
in  the  matter.  In  order  to  carry  on  their  productive  proc- 
ess it  is  not  suficient  to  produce  commodities:  they  must 
convert  them  into  money  continuously,  in  order  to  recom- 
mence the  process  and  carry  it  steadily  on.  Such  is  the 
irony  of  the  situation  that,  though  both  labourers  and 
capitalists  are  performing  social  duties,  and  cannot  but 

108 


CIRCULATION  OF  COMMODITIES         109 

perform  them,  they  both  also  carry  on  their  share  of  such 
social  work  solely  for  personal  and  individual  objects.  The 
labourers  toil  only  incidentally,  as  it  were,  from  their 
point  of  view,  to  make  articles  of  social  use.  They  sell 
their  labour-power  in  order  to  obtain  wages  in  money,  and 
how  their  labour-power  is  applied,  so  long  as  they  get  those 
wages,  in  return  for  a  given  period  of  work,  concerns  them 
not  at  aU. 

The  capitalists,  on  their  side,  use  this  labour  power,  not 
with  any  idea  of  providing  society  with  what  its  members 
want,  as  a  social  function;  but  they  perform  this  social 
duty  also,  as  it  were,  by  the  way,  and  on  the  road  to 
securing  their  profit.  If  capitalists  could  obtain  profit 
without  using  all  the  complicated  machinery,  human  and 
other,  necessary  for  the  output  of  useful  articles,  nothing 
would  please  them  better.  Their  sole  and  only  aim,  as  a 
class,  is  to  obtain  as  much  profit  as  possible,  and  to  extend 
their  business  at  the  expense  of  other  capitalists,  their 
rivals,  in  order  to  prevent  these  rivals  from  absorbing  them. 
No  social  or  human  consideration  has  any  weight  in  the 
matter. 

The  surplus  value  is  squeezed  out  of  the  labourers  in  the 
factory,  in  the  mine  or  on  the  farm,  and  the  capitalist's 
share  of  it,  in  the  form  of  net  profit,  is  contained  in  the 
overplus  of  commodities  created  by  the  unpaid  labour  of  his 
workers.  There  it  is  at  his  disposal.  But  it  is  not  realised 
as  yet.  Moreover,  his  total  product,  in  its  commodity 
shape  of  cotton  cloth,  woollen  cloth,  boots,  hats,  iron  goods, 
wheat,  lead,  &c.,  cannot  be  used  to  buy  directly  the  raw 
materials  and  all  that  he  needs  to  begin  afresh.  The  land- 
lord will  not  accept  his  ground-rent,  nor  the  banker  his 
interest  on  loans,  in  kind.  Sell  for  money  the  capitalist 
must. 


110  THE  ECONOMICS  OF  SOCIALISM 

In  this  way,  therefore,  the  circulation  of  commodities  in 
our  modern  society  begins.  Articles  are  produced  to-day 
in  such  conditions  that  they  are  of  no  use  to  those  who 
produce  them.  Consequently,  they  must  be  moved  round 
the  circle  of  exchange  until  they  reach  the  hands  of  the 
persons  who  need  them,  and,  what  is  more  important,  can 
pay  for  them  —  pay  for  them  in  money,  or  the  equivalent 
of  money,  that  is  to  say.  Mere  need  constitutes  no  title  to 
commodities:  mere  demand  is  of  no  account.  The  need 
must  be  a  need  backed  by  hard  cash :  the  demand  must  be 
what  the  old  economists  called  an  effective  demand. 

Money  it  is  which  renders  this  circulation  of  commodi- 
ties, this  whirl  of  exchange,  possible.  Barter,  the  direct 
exchange  of  commodities,  is  at  an  end.  This  form  of  the 
exchange  of  useful  things,  from  the  hands  of  those  to 
whom  they  are  not  useful  into  the  possession  of  others  to 
whom  they  are  useful,  is  different  in  every  respect  from 
the  process  which  we  see  going  on  all  round  us  to-day.  In 
barter,  or  direct  exchange  for  mutual  use,  the  product  of 
useful  labour  in  one  form  takes  the  place  of  the  product 
of  useful  labour  in  another  form.  The  farmer,  for  in- 
stance, exchanges  his  sacks  of  wool  against  a  pedlar's 
silks,  who  again  trades  away  the  wool  for  finished  cloth. 
Consumption  follows,  and  the  mere  circulation  is  at  an 
end. 

Attempts  have  been  made  to  restore  the  direct  exchange 
or  barter  of  useful  goods  between  one  individual  and  an- 
other. But  so  completely  has  the  idea  of  valuation  apart 
from  money  disappeared,  that,  insensibly,  those  who  wish 
to  obtain  other  articles  in  place  of  their  own,  estimate  the 
value  of  their  possessions  which  they  propose  to  transfer, 
not  with  reference  to  the  need  which  they  have  of  the  other 
articles  they  desire  to  possess  in  place  of  these,  but  with 


CIECULATION  OF  COMMODITIES  111 

regard  to  the  price  that  either  would  realise  if  brought  into 
the  open  market.  An  exchange  of  commodities  may  be 
directly  effected  between  individuals  by  barter;  but,  still, 
in  spite  of  all  they  can  do,  the  vision  of  the  price  current 
is  ever  before  them. 

When,  however,  a  commodity  is  exchanged  for  money, 
something  much  more  has  taken  place  than  a  mere  exchange 
or  transfer  of  commodities.  When,  for  instance,  our  capi- 
talist, impelled  thereto  by  the  very  necessity  of  his  being, 
sells  his  cotton  cloth,  or  his  boots,  for  money,  he  does  a 
great  deal  more  than  merely  part  with  useful  articles  for 
gold.  For  gold,  of  course,  is  by  no  means  always  money, 
any  more  than  money  is  always  gold. 

Thus  gold  itself,  when  it  is  only  a  commodity,  when,  that 
is  to  say,  it  is  a  bar  of  the  precious  metal  to  be  used  in 
industry  or  the  arts  —  gold  in  this  case  is  no  more  money 
than  a  bar  of  platinum,  or  a  bar  of  tin,  or  a  pig  of  lead, 
likewise  destined  for  use  in  the  arts,  is  money.  The  capi- 
talist who  sold  his  goods  even  for  bar  gold,  in  such  cir- 
cumstances, would  not  have  done  that  which  he  wished  to 
do.  And  the  individual  purchaser,  like  the  individual 
capitalist,  who  wished  to  buy,  and  thus  begin  a  circula- 
tion of  commodities,  extending  far  beyond  his  own  immedi- 
ate purchase  and  sale,  would  at  once  discover  that  gold, 
merely  as  a  commodity,  would  not  do  his  business.  He 
would  be  forced,  when  he  got  it,  to  resort  to  a  bullion 
dealer  and  convert  his  valuable  commodity  into  money 
before  he  could  buy  a  bible  for  £2  out  of  the  proceeds  of 
the  sale  of  some  linen  for  that  £2,  thus  enabling  the  owner 
of  the  bible  to  buy  brandy  with  the  same  £2,  and  so  on  and 
so  on. 

Gold  in  its  money  shape  is  a  very  different  thing,  then, 
from  gold  as  a  mere  commodity.     It  performs  in  its  o^vm 


112  THE  ECONOMICS  OF  SOCIALISM 

person  in  this  shape  several  functions,  and  figures  as  real 
and  ideal  at  one  and  the  same  time.  Gold  as  money  is 
the  very  corporeal  expression  of  value,  or  social  value.  It 
is  in  itself  the  very  incarnation  and  embodiment  of  such 
value.  In  such  a  case,  in  Marx's  own  words,  "  gold  as  gold 
is  exchange  value  itself."  It  possesses  the  power  of  con- 
verting itself,  or  being  converted  by  its  possessor,  into  all 
the  useful  social  articles  which  can  be  obtained.  And  it 
possesses  this  power  although  its  own  utility  has  been 
taken  from  it  altogether,  for  the  purpose  of  evaluation, 
exchange  and  price. 

Here,  as  in  the  original  investigation  of  value,  we  are 
driven  to  abstract  reasoning.  When  it  is  said  that  gold  in 
the  form  of  money  is  exchange  value  itself,  what  is  meant  ? 
This :  that  gold,  when  all  its  useful  properties  are  no 
longer  taken  into  consideration  —  and  this  is  manifestly 
the  case  when  it  is  proposed  to  use  it  as  a  measure  of  value, 
or  as  money  —  has  ceased  to  be  a  commodity  in  any  sense. 
As  a  measure  of  value  for  all  the  commodities  offered  on 
the  market  it  is,  in  fact,  a  mirror  which  reflects  at  once  the 
value  of  each  in  turn  as  an  ordinary  mirror  reflects  the 
"  values  "  of  the  human  face. 

When  this  is  done  we  have  ceased  to  trouble  ourselves 
about  the  cost  of  production  of  gold  itself,  or  about  its 
greater  or  less  utility.  It  is  recognised  as  the  measure  of 
all  values,  because  it  is  the  universally  admitted  repre- 
sentative of  the  embodiment  of  social  human  labour  in  the 
abstract.  Thus  used,  money  converts  the  values  of  the 
infinite  number  of  commodities  into  imaginary  quantities 
of  gold.  And  this  comes  about  not  because  money  renders 
it  possible  to  measure  the  value  of  commodities.  "The 
contrary  is  the  case.     Only  because  all  commodities,  in  so 


CIECULATION  OF  COMMODITIES  113 

far  as  they  are  values,  are  embodied  human  labour,  are 
they  capable  of  being  measured  in  relation  to  one  another ; 
and,  secondly,  are  they  capable  of  being  measured  in  one 
and  the  same  special  commodity  which  becomes  the  com- 
mon measure  of  them  all."  This  special  commodity  being 
converted  into  common  measure,  namely,  money  —  Bax's 
"  matterless  form  " —  reflecting  the  values  of  commodities 
all  round. 

So  far  of  the  gold  which  the  capitalist  must  have  as  a 
measure  of  value.  As  a  standard  of  price,  money  meas- 
ures the  quantities  of  gold  which  have  previously  been 
imaginary.  The  ordinary  price  current  gives  the  result  of 
the  latest  competition  on  the  market  in  yarns,  cloths,  iron, 
coffee,  wheat,  and  so  on;  not  in  imaginary  quantities  of 
gold,  but  in  actual  sovereigns.  Yet,  of  course,  this  is  an 
ideal  valuation.  Each  possessor  of  useful  goods  sees  in 
place  of  his  special  commodity  its  market  price.  Its  utility 
has  ceased  to  concern  him.  What  he  is  concerned  with 
is  the  price,  and  the  price  alone,  that  he  is  likely  to  get. 
And  it  is  this  standard  of  price  that  money  provides  him 
with.  Moreover,  the  changes  whicli  may  take  place  in  the 
value  of  gold  itself  do  not  affect  its  function  as  this  stand- 
ard of  price. 

In  the  ordinary  form  of  the  circulation  of  commodities 
the  change  is  from  money  to  commodities  and  then  from 
commodities  back  to  money.  When  the  commodity  moves 
out,  its  equivalent,  money,  steps  into  its  place;  and  several 
moves  of  this  kind  may  be  made  before  the  commodity 
reaches  its  final  destination  and  is  consumed:  the  money 
being  always  in  the  hands  of  the  buyer  and  the  commodity 
in  the  possession  of  the  seller.  From  this  point  of  view 
gold  and  money  in  general  form  a  convenience  of  ex- 


114  THE  ECONOMICS  OF  SOCIALISM 

change,  as  already  said.  It  is  a  means  of  facilitating  the 
circulation  of  commodities  from  those  who  want  to  sell  to 
those  who  need  to  buy  and  use. 

But  to  the  capitalist  mone}''  is  the  means  whereby  he  can 
realise  at  one  stroke  all  the  values  locked  up  in  the  commod- 
ities which  he  has  produced,  including  the  surplus-value, 
which  was  the  real  reason  why  he  produced  them  at  all; 
and,  having  thus  obtained  his  money  back  with  an  incre- 
ment, he  can  begin  the  whole  process  over  again.  But, 
further,  money  represents  to  the  capitalist,  as  well  as  to 
the  rest  of  the  world,  the  means  of  payment ;  the  means  of 
paying  his  rent,  of  meeting  bills  when  due,  of  discharging 
gas  and  water  rates  and  the  like. 

In  this  respect  money  acts  no  longer  merely  as  a  circu- 
lating medium.  It  is  no  longer  only  an  agent  in  facilitat- 
ing the  exchange  and  circulation  of  useful  products.  Now 
it  becomes  the  individual  incarnation  of  social  labour,  the 
embodiment  in  itself  of  the  value  of  an  aliquot  part  of  that 
labour.  It  is  the  independent  form  of  existence  of  ex- 
change value,  the  universal  commodity  which  everybody 
desires,  standing  by  itself.  Here  we  have  a  contradiction 
and  an  antagonism  in  the  uses  of  money,  which  produce 
a  very  practical  effect  indeed  at  periods  of  industrial  and 
financial  tension.  Money,  at  these  times,  may  be  in  such 
great  demand  as  a  means  of  payment  that  its  purpose  as  a 
means  of  promoting  the  circulation  of  commodities  will  be 
temporarily  quite  lost  sight  of. 

Nor  is  it  only  in  days  of  stress  and  strain  that  this  mis- 
take is  made.  Such  is  the  influence  of  money  on  the  hu- 
man mind,  that,  just  as  in  the  domain  of  industry,  human 
beings  are  physically  dominated  by  the  very  machinery 
which  they  themselves  make,  and  which  they  should  con- 
trol to  the  common  advantage,  in  order  to  lessen  the  amount 


CIRCULATION  OF  COMMODITIES  115 

of  labour  needed  to  create  wealth,  instead  of  allowing  it 
to  be  used  to  pile  up  riches  against  them;  so  this  other 
social  creation,  money,  in  place  of  being  regarded  by  the 
many  as  a  mere  instrument,  to  be  used  in  existing  con- 
ditions to  facilitate  the  transfer  of  their  products,  is 
looked  upon  as  wealth  itself.  Because  money  will  pur- 
chase all  that  they  want  and  give  to  its  possessors  power 
over  the  community,  therefore  it  becomes  to  the  mass  of 
mankind  something  much  more  than  a  mere  symbol  of 
social  value,  a  standard  of  price,  or  even  a  means  of  pay- 
ment. Money  is  the  one  thing  needful,  the  one  object 
we  ought  all  to  strive  for ! 

When  economists  tell  the  people  that  money  is  not 
wealth  and  that  its  creation,  beyond  certain  well-defined 
limits,  is  not  only  not  advantageous  but  positively  a  waste  of 
the  time  and  labour  of  the  community,  the  majority  of 
men  and  women  still  refuse  to  believe  it.  Wealth  seems 
to  them  to  come  from  above,  in  the  shape  of  money;  as  it 
does  to  the  domestic  servant,  or  the  cabman,  who  receives 
his  wages  or  his  fare  from  his  master  or  his  employer. 
There  cannot,  therefore,  be  too  much  of  it.  Even  men 
who  ought  to  know  better  not  unfrequently  encourage  for 
their  own  purposes  this  illusion.  Not  so  very  long  ago, 
for  instance.  Lord  Morley,  who  is  commonly  supposed  to 
have  cleared  his  mind  of  supernaturalism  in  every  shape, 
publicly  made  his  obeisance  to  this  money  fetish.  He 
hoped  that  the  day  would  never  come  when  we  English- 
men should  cease  to  be  very  careful  about  money.  Obvi- 
ously money  in  this  sense  meant  to  our  philosophic  politi- 
cian something  much  more  than  incorporated  social  labour 
counters,  and  those  whom  he  addressed  so  understood  him. 

Nevertheless,  in  order  to  comprehend  the  working  of 
our  capitalist  system,  and  the  function  which  money  or  its 


116  THE  ECONOMICS  OP  SOCIALISM 

representatives,  bank-notes,  drafts,  cheques,  bills,  and  the 
like,  play  in  facilitating  circulation  and  exchange:  in 
order,  too,  to  detect  the  real  significance  of  that  antag- 
onism between  commodities  and  money,  which  plays  so 
crucial  a  part  in  the  immediate  bringing  about  of  finan- 
cial crises;  it  is  absolutely  necessary  to  clear  the  mind  of 
all  this  confusion. 

Mere  money  is,  as  said,  a  useful  commodity  deprived  of 
its  utility  and  applied  to  a  special  purpose.  Taken  at  its 
full  value  it  forms  but  a  very  small  and  insignificant  frac- 
tion of  the  total  accumulated  labour-value  of  any  civilised 
community.  So  far,  also,  from  a  superabundance  of 
money  necessarily  bringing  with  it  good  trade,  it  is  an 
absolute  certainty  that  any  supply  of  money,  over  and 
above  what  is  actually  needed  for  the  service  of  any  given 
society,  will  simply  lie  idle  in  the  banks.  What  is  the 
quantity  of  currency  required  to  do  the  circulating  work  of 
any  nation  was  proved  theoretically  more  than  two  hundred 
years  ago,  and  is  determined  in  practice  by  many  who  never 
looked  into  the  theory  of  the  subject  in  their  lives.  In  the 
same  way  that  many  a  skipper  will  safely  navigate  his 
craft,  by  observation  and  calculation,  who  never  gave  a 
thought  to  the  theory  on  which  the  logarithmic  tables  he 
uses  are  based.  The  amount  of  money  necessary  depends, 
then,  upon  the  value  and  rapidity  of  circulation  of  the 
commodities  to  be  moved  from  where  they  are  not  useful 
into  the  consumer's  hands. 

A  common  example  of  this  is  what  is  called  the  "mov- 
ing of  the  crops."  That  operation  in  this  and  other  coun- 
tries, and  especially  in  the  United  States,  calls  for  a  very 
large  sum  in  hard  cash.  When  the  crops  move  out  from 
the  farmers  money  must  flow  in,  and  at  each  successive 
stage  of  the  movement,  as  the  wheat,  hay,  cotton,  wool,  &c., 


CIRCULATION  OF  COMMODITIES  117 

passes  on  to  its  destination,  money  must  come  in  to  fill  up 
the  gap.  Moreover,  it  is  some  time  before  the  money  thus 
sent  out  from  the  banks  in  gross  begins  to  flow  back  in 
detail.  This  occurs  when  the  farmers  and  their  associates 
begin  to  purchase  supplies  from  the  shopkeepers  or  store- 
keepers; who,  in  turn,  remit  through  the  local  banks  to 
the  central  institutions  as  they  give  their  orders  for  fresh 
supplies,  for  the  replenishment  of  their  stocks  of  goods  de- 
pleted by  the  farmers'  purchases. 

It  is  almost  needless  to  point  out  in  this  case  that  if 
more  money  were  sent  out  than  was  required,  for  the  pur- 
pose of  facilitating  the  circulation  of  the  food-stuffs  to  be 
moved,  nobody  would  gain  by  it.  The  prices  which  the 
farmers  obtain  for  their  product  in  bulk  are  not  regu- 
lated by  the  temporary  scarcity  or  temporary  superabund- 
ance of  currency  at  a  particular  spot ;  though  possibly  in  a 
case  here  or  there  an  individual  may  lose  or  gain  by  these 
local  circumstances.  The  farmers'  prices,  on  the  contrary, 
are  governed  by  the  condition  of  the  world-market  in  re- 
gard to  their  special  products.  The  main  competition  and 
higgling  of  the  market  wliich  determine  the  quantity  of 
simple,  abstract  human  labour  embodied  in  what  they  want 
to  sell  take  place  not  locally  but  centrally.  Tlie  local 
trade  is  conducted  within  very  narrow  limits  of  possible 
fluctuation. 

This  is  a  simple  case,  and  it  occurs  as  a  rule  but  once  a 
year  on  a  large  scale.  With  manufacturers  it  takes  place 
much  more  frequently,  the  rapidity  of  the  turnover  being 
increased  or  slackened  according  to  the  circumstances  of 
the  particular  trade,  and  the  amount  of  money  needed  in 
all  to  move  the  goods  is  regulated  in  each  case,  by  the  entire 
period  taken  to  complete  and  realise  the  product.  To 
take,  in  passing,  the  case  of  a  wholesale  baker,  whose  sales 


118  THE  ECONOMICS  OF  SOCIALISM 

are  from  day  to  day,  and  his  bills  are  collected  week  by 
week ;  it  is  obvious  that  the  amount  of  currency  needed  to 
circulate  his  commodity  at  any  given  time  is  very  small, 
as  compared  with  his  total  yearly  output,  by  the  side  of 
what  is  needed  to  perform  the  same  office  for  a  farmer  who 
is  carrying  on  business  on  relatively  the  same  scale.  Here, 
however,  as  in  the  farmer's  case,  a  great  supply  of  currency 
would  not  facilitate  the  circulation  of  the  bread  in  any 
way;  unless,  indeed,  a  philanthropist  were  to  provide  a 
number  of  poor  people  in  the  neighbourhood  with  the  means 
of  buying  loaves  which  otherwise  they  could  not  have 
bought. 

This,  no  doubt,  is  what  many  who  crave  for  an  expan- 
sion of  the  currency,  have  in  tbeir  minds,  as  in  some  way 
or  another  likely  to  occur,  if  the  State  sets  the  mints  going 
at  twice  their  ordinary  rate,  or  if  valueless  money,  in  the 
shape  of  notes  with  no  coin  behind  them,  were  tumbled 
out  upon  the  country.  But  a  very  slight  consideration 
will  show  the  most  careless  reader  that  a  mere  increase  of 
currency  by  itself  will  not  bring  about  the  circulation  of 
more  loaves  of  bread;  while  the  creation  of  a  mass  of  State 
assignats  receivable,  as  some  propose,  in  payment  of  taxes, 
would  not  benefit  a  country  in  any  way  whatever.  Those 
who  keep  their  eyes  steadily  fixed  on  the  production  of 
articles  of  utihty  and  their  circulation  as  embodiments  of 
human  labour  value  are  not  likely  to  be  led  astray  by  the 
will-o'-tlie-wisps  of  the  currency-mongers  of  any  school. 

To  return  to  the  cipitalist  and  his  proceedings.  He  be- 
gins with  money,  buys  his  raw  materials  of  production,  in- 
cluding labour-power,  takes  tbese  into  the  sphere  of  pro- 
duction itself,  and  emerges  therefrom,  as  already  explained, 
with  the  sum  of  all  the  values  expended  during  the  process 
embodied  in  commodities,  plus  the  increment  which  he  has 


CIECULATION  OF  COMMODITIES  119 

squeezed  out  of  purchased  labour-power.  These  commodi- 
ties he  then  sells  for  money,  which  replaces  his  original 
money  advance  with  something  more.  Tliat  ends  this  par- 
ticular cycle  for  him.  The  form  of  it  is  money,  then  raw 
materials  and  incidental  materials,  then,  lastly,  more 
money.  Or,  money,  commodities,  money  again.  And  the 
capitalist  regards  labour-power  simply  as  one  of  his  com- 
modities and  the  wages  paid  in  money  as  a  part  of  his  in- 
evitable pecuniary  expenditure.  The  money  itself  has,  of 
course,  no  say  in  the  matter.  What  sort  of  goods  it  buys 
does  not  affect  the  universal  equivalent  in  any  way. 

Certain  it  is  that  money  is  not  in  any  sense  the  cause 
of  wagedom.  The  workers  exist  separated  from  their 
means  of  production.  There  they  are,  on  the  one  side, 
ready  to  sell.  There  stands  the  capitalist,  on  the  other 
side,  ready  to  buy,  and  to  bring  these  divorced  elements  of 
production  together  —  on  terms.  He  does  so  by  means  of 
money.  But  it  is  not  the  money  itself,  nevertheless,  which 
brings  about  the  social  conditions  that  result  in  the  an- 
tagonistic classes  of  capitalists  and  wage-earners.  Not  at 
all.  The  labour-power  of  the  workers  can  be  bought  as  a 
commodity,  and  its  product  put  in  circulation,  because  these 
social  classses  already  exist  in  predetermined  conditions. 
It  is  the  same  as  it  was  with  slavery.  Money  bought 
slaves,  and  slaves  were  sold  for  money.  But  this  could 
only  be  done  where  slaves  existed.  Money  could  not  make 
slavery  possible  by  itself;  so  neither  can  it  make  wage- 
slavery  possible  by  itself. 

From  the  labourer's  side  the  whole  process  takes  quite  a 
different  aspect,  however.  He  is  the  seller  of  the  commod- 
ity, labour-power,  and  is  anxious  to  circulate  it  in  return 
for  money.  He  does  so,  and  his  labour-power  goes  into  the 
possession  and  under  tlie  power  of  the  purchaser  at  its  mar- 


120  THE  ECONOMICS  OF  SOCIALISM 

ket  price.  The  money  which  he  receives  at  the  end  of  the 
week  in  the  shape  of  wages,  for  the  advance  of  his  labour- 
power  for  that  time  to  the  capitalist,  represents  to  him  the 
means  of  buying  other  commodities  necessary  for  his  mere 
subsistence;  thus  beginning  with  his  money  a  circulation 
of  commodities  at  the  other  end. 

Whether  his  money-wage  goes  into  the  publican's  tiU  or 
the  baker's  purse,  may  make  a  difference  to  him,  but  in 
either  case  the  money  has  gone  from  him  in  exchange  for 
commodities.  The  labourer,  unlike  the  capitalist,  begins, 
then,  with  commodities,  his  labour-power,  to  wit,  exchanges 
for  money,  and  passes  on  to  the  purchase  of  commodities; 
though  in  his  case  the  shape  in  which  he  receives  his  wages 
disguises  from  him  the  truth  that  he  has  received  only  a 
fraction  of  the  value  of  the  labour  embodied  by  his  labour- 
power,  and  that  the  remainder  is  either  in  his  employer's 
possession  or  is  circulating  on  the  market:  in  both  cases 
far  removed  from  him. 

Clearly,  also,  when  money  as  capital  goes  out  on  to  the 
market,  and  is  converted  into  the  raw  material  of  produc- 
tion, or  productive  capital,  this  productive  capital  can  no 
longer  circulate.  It  must  go  into  the  productive  process, 
that  is,  into  consumption,  whence  it  emerges  in  a  changed 
form,  and  must  then  go  out  into  circulation  again.  Sim- 
ilarly, that  portion  of  the  raw  material  of  the  indispensa- 
ble element  of  production  called  labour-power  can  only 
realise  its  use  in  the  productive  process,  and  create  values 
for  future  circulation,  quite  irrespective  of  the  will,  or 
even  of  the  knowledge,  of  its  original  seller. 

It  may  be  convenient  to  give  here  the  various  categories 
of  capital  which  Marx  substituted  for  the  bald  "  fixed " 
and  "  circulating "  capital  of  the  orthodox  economists. 
These  separations  and  distinctions,  when  firmly  grasped, 


CIRCULATION  OF  COMMODITIES  121 

render  it  easy  to  comprehend  the  somewhat  complicated 
phenomena  of  modern  industrial  society: 

I.  The  Money-Capital.  This  may  be  taken  as  the  start- 
ing-point of  the  whole  process.  With  this,  as  already  often 
said,  the  capitalist  goes  out  on  to  the  market  to  buy  his 
raw  materials  of  production,  in  order  to  convert  them  into 
commodities,  and  eventually  to  increase  his  cash  capital. 
It  is  only  when  used  in  this  way  that  money  is  active  capi- 
tal. Money  of  itself  need  not  be  capital,  but,  when  it  is 
in  the  hands  of  a  capitalist  who  is  using  it  for  the  purpose 
of  producing  commodities  with  a  profit  to  himself, —  then 
it  is  capital  in  its  most  active  shape. 

II.  The  Commodity  Capital,  or  Raw  Material  Capital, 
which  signifies  the  purchased  commodities,  including 
Labour-Power,  that,  having  been  bought  with  the  money 
capital,  are  taken  into  the  sphere  of  production.  Here  their 
form  is  completely  changed,  as  raw  cotton  is  converted  into 
yard  and  afterwards  into  cloth,  leather  into  boots,  iron- 
ore  into  iron,  clay  into  porcelain,  &c.  Some  of  the  mate- 
rials, in  fact,  as  coal,  oil,  gas,  completely  disappear.  But, 
none  the  less,  the  spirit  of  these  component  parts  of  the 
commodity  capital,  their  value,  appears  in  the  completed 
commodities.  The  commodity  capital,  including  labour- 
power,  goes  into  the  productive  or  labour  process  as  a  num- 
ber of  commodities,  and  comes  out  again  as  a  quantity  of 
commodities. 

"  One  of  the  most  striking  peculiarities  of  the  circula- 
tion process  of  industrial  capital,  and  therefore  also  of 
capitalist  production  as  a  whole,  is  the  circumstance  that 
on  the  one  hand  the  elements  for  the  formation  of  pro- 
ductive capital  come  out  of  the  market  for  commodities, 
and  are  continually  renewed  therefrom ;  that,  in  fact,  they 
must  be  bought  as  commodities :  on  the  other  hand,  the 


122  THE  ECONOMICS  OF  SOCIALISM 

products  of  the  labour-process  issue  from  it  as  commodities, 
and  as  commodities  they  must  be  sold." 

Compare,  for  instance,  a  modern  farmer  working  his 
farm  on  the  best  method  with  the  highest  skill  and  a 
farmer  of  the  old  time.  The  modern  farmer,  though  he 
still  scarcely  regards  himself  as  a  capitalist  in  the  manu- 
facturing sense,  is  so  completely  overmastered  by  the 
necessities  of  the  capitalist  system  that  he  sells  off  his  farm 
everything  he  can  sell.  Frequently  he  even  purchases  his 
seed  for  the  next  crop.  If  he  does  not  sell,  unless  he  is 
merely  holding  for  speculative  purposes,  he  feels  he  has 
made  a  mess  of  his  business. 

The  old-world  farmer,  on  the  contrary,  so  far  from  sell- 
ing everything  he  could  sell,  sold  as  little  as  he  possibly 
cotild.  His  object  was  to  provide  for  himself  and  those 
around  him  to  the  full  extent  that  was  possible,  doing  this 
often  at  the  expense  of  far  more  labour  than  was  neces- 
sary, had  he  sold  some  portion  of  his  product  and  bought 
with  the  proceeds.  But  he  only  sold  his  actual  superfluity. 
The  contrast  is  marked.  In  the  one  case  buy  everything 
and  sell  everything.  In  the  other  case  buy  as  little  as 
possible  and  sell  only  the  surplus. 

III.  Fixed  Capital.  This  does  not  mean  capital  fixed 
to  a  particular  spot  of  ground,  as  a  factory,  or  a  furnace, 
or  a  mining-plant,  or  a  machine.  Fixed  capital  in  Marx's 
sense  means  such  proportions  of  the  capital,  whether  build- 
ings, machines,  tools,  steam-engines,  or  similar  appliances, 
as  only  transfer  a  portion  of  their  value  in  the  course  of 
production  to  the  commodity  produced ;  thus  giving  over 
their  value  to  the  commodities  by  degrees,  the  remainder 
of  the  value,  over  and  above  that  which  has  been  parted 
with  in  the  productive  process,  remaining  fixed  in  them. 


CIECULATION  OF  COMMODITIES         123 

The  whole  of  their  value  is,  of  conrse,  used  up  and  trans- 
ferred to  the  commodities  sooner  or  later.  But  this  bit  by 
bit  transference  may  extend  over  many  years,  and  conse- 
quently, as  remarked  in  the  last  chapter,  the  greater  part 
of  the  original  value  of  the  structure,  or  of  the  machinery, 
may  long  since  have  gone  forth  into  the  great  whirl  of 
commodities,  while  the  building  itself  or  the  machinery 
still  continues  in  a  more  or  less  complete  condition  to  fulfil 
its  part  in  the  process  of  capitalist  production  of  commod- 
ities. "  Capital  is  not  '  fixed '  because  it  is  fixed  in  the 
instruments  of  labour,  but  because  one  portion  of  its  value, 
embodied  in  instruments  of  labour,  remain  fixed  therein, 
whilst  another  portion  is  in  circulation  as  a  fraction  of  the 
entire  value  of  the  completed  product." 

This  is  recognised  in  practice.  In  all  properly-kept  ac- 
counts, there  is  a  yearly  deduction  of  from  ten  or  more 
per  cent,  made  from  profits  to  allow  for  depreciation  — 
this  depreciation  representing,  on  the  average,  the  pro- 
portion of  value  which  has  been  parted  with  by  the  fixed 
capital  to  the  commodities  in  the  course  of  production  and 
which,  in  some  way  or  other,  has  to  be  replaced.  This 
has  nothing  to  do  with  the  so-called  "  moral "  depreciation 
spoken  of  by  Marx,  due  to  the  introduction  of  some  new 
method  of  producing  the  same  commodities  with  more 
costly  appliances  and  less  labour.  This  there  is  no  means 
of  calculating  beforehand,  and  the  danger  to  the  individual- 
capitalist  can  only  be  met  by  a  deduction  from  his  surplus 
value,  or  his  share  of  it  in  the  shape  of  profit,  thus  en- 
abling him  in  time  to  adopt  the  improved  methods,  if  it 
seems  desirable  to  do  so.  "With  that,  however,  we  have 
nothing  to  do  here. 

It  should  be  noted,  however,  that  fixed  capital,  like  all 


124  THE  ECONOMICS  OF  SOCIALISM 

other  capital,  is  a  direct  product  of  human  labour,  and 
that  its  repairs  and  renewals  are,  of  course,  in  like  manner 
due  to  human  labour. 

The  whole  factory,  building,  works,  machinery,  new  ap- 
pliances and  inventions,  are  due  also  to  the  social  sur- 
roundings and  social  status  of  those  who  construct  them. 
There  is  no  individual  genius  at  work  here  of  such  colossal 
magnitude  that  its  possessor  can  divorce  himself  from  his 
begettings,  surroundings,  and  education,  and  thus  invent, 
apply,  construct  and  use,  so  to  say,  in  vacuo.  There  is  no 
human  being  who  is  entitled  to  say  of  any  fixed  capital,  of 
any  machinery  or  works,  however  cunningly  devised,  "  I 
did  this,"  "  I  am  the  unit  that  gives  to  the  human  cyphers 
their  value."  All  such  things,  great  or  small,  arise  from 
the  society  in  which  they  are  made,  and  which,  as  a  society, 
creates  them. 

It  is  necessary  to  state  this  again  here,  because  certain 
economists  constantly  reiterate  that  all  improvements  are 
due  to  individual  persons,  and  that  therefore  —  the  ethic 
is  as  peculiar  as  the  logic  is  faulty  —  certain  other  persons, 
namely,  the  capitalist  class,  who  did  not  invent  them,  really 
ought  to  possess  them,  by  reason  of  the  value  which  these 
inventions  create !  But  improvements  in  methods  of  pro- 
duction which  increase  fixed  capital,  and  entail  the  use  of 
machinery  on  a  larger  scale,  do  not,  as  remarked  before, 
increase  the  value  of  commodities  but  reduce  it;  and  the 
capitalist  obtains  an  increased  profit  by  the  larger  output, 
not  by  selling  dearer,  but  by  producing  cheaper ;  that  is  to 
say,  with  a  less  expenditure  of  human  labour. 

Again,  a  product  of  industry  may  be  a  mere  commodity 
to  its  producer  and  fixed  capital  to  its  purchaser.  Thus 
the  maker  of  cotton-spinning,  or  cotton-weaving,  machin- 
ery, the  constructor  of  a  steam-hammer,  a  crane,  or  a 


CIRCULATION  OF  COMMODITIES  125 

hydraulic  press,  necessarily  regards  his  product  as  a  com- 
modity. He  in  fact  sells  it,  and  is  forced  to  sell  it,  as  a 
commodity,  and,  if  not  made  to  a  definite  order,  domestic 
or  foreign,  it  goes  out  upon  the  market  as  a  commodity,  to 
circulate  with  other  commodities,  until  such  time  as  it 
finds  its  ultimate  purchaser,  in  England,  America,  Aus- 
tralia, Germany,  China  or  Japan.  Then  it  does  become 
fixed  capital  to  that  last  purchaser,  who  applies  it  to  pro- 
ductive purposes;  and  the  spindles,  the  looms,  the  steam- 
hammer,  and  so  on,  proceed  to  give  off  of  their  value  to  the 
commodities  which  they,  in  their  form  of  fixed  capital, 
having  ceased  themselves  to  be  commodities,  help  to  create. 

Further,  mere  fixity  has  nothing  to  do  with  the  defini- 
tion. A  locomotive  engine,  like  the  machines  named  above, 
is  a  commodity  to  its  producer  for  sale,  but  is  fixed  capital, 
involving  a  lock-up  of  capital,  only  gradually  set  free,  to 
those  who  use  its  power  as  intended.  Oxen  as  ploughing 
oxen  are  fixed  capital  to  their  proprietor.  Sold  off  the 
farm  they  figure  as  commodities.  Fatted  and  killed  for 
the  farmer's  food  they  become  mere  articles  of  consump- 
tion. And  so,  in  many  similar  cases,  it  can  be  easily 
seen  that  the  old  imperfect  definition  of  fixed  capital  must 
be  abandoned  in  favour  of  the  true,  scientific,  definition  of 
fixed  capital  given  above. 

IV.  Circulating  Capital  is  that  portion  of  the  constitu- 
ents of  production  which  consists  of  the  raw  materials,  the 
incidental  materials  (what  the  Germans  call  help-mate- 
rials), labour,  &c.,  whose  value  is  wholly  incorporated  in 
the  completed  commodity  during  the  process  of  produc- 
tion. It  consists  of  capital  in  the  commodity  shape.  It  is 
circulating  capital,  in  the  form  of  finished  commodities  or 
stocks  of  commodities;  as  distinguished  alike  from  the 
money  capital  into  which  it  is  converted  at  the  next  stage, 


126  THE  ECONOMICS  OF  SOCIALISM 

and  which  it  was  —  less,  of  course,  the  amount  of  the  sur- 
plus value  —  in  the  previous  stage;  and  as  distinguished 
from  the  fixed  capital,  the  greater  portion  of  whose  value 
has  probably  not  yet  been  given  forth  to  the  commodities 
which  have  been,  or  are  about  to  be,  thrown  into  circu- 
lation. 

This  form  of  capital,  circulating  capital,  is  well  under- 
stood in  all  financial  accounts,  and  when  a  manufacturing 
business  is  valued  for  any  purpose  a  well-defined  distinc- 
tion is  drawn  between  the  realisable  stocks  of  commodities, 
whether  they  be  clothing,  or  boots,  or  hats,  or  barrels  of 
beer,  which  can  be  put  in  circulation  at  once,  and  the 
machinery,  buildings,  waggons,  horses  and  carts,  which 
form  a  portion  of  the  same  industrial  establishment.  Such 
commodities  can  be  exchanged,  and,  of  course,  must  be 
exchanged,  for  money;  but  as  they  lie  in  stock  they  con- 
stitute liquid  capital,  which  represents  all  the  immediate 
advances  made  in  their  creation. 

The  old  French  economists,  who  are  known  as  the  Physio- 
crats, made  this  distinction  between  immediate  advances 
and  permanent  advances,  which  they  designated  avarices 
annuelles  and  avarices  primitives.  Applied,  as  these  two 
categories  were  by  them,  almost  solely  to  agriculture,  the 
primitive,  or  permanent,  advances  represented  the  capital 
embarked  in  draining,  making  roads,  constructing  build- 
ings, purchasing  ploughs,  horses,  sheep,  and  so  on.  The 
annual  advances,  realised  in  the  shape  of  cereals,  wine,  wool, 
&c.,  consisted  in  seed,  manure,  food  for  cattle  and  the  like, 
which  each  yearly  crop  necessitated.  To  them  the  differ- 
ence between  the  two  forms  of  capital  consisted  in  the 
longer  or  shorter  period  of  their  return  to  the  person 
advancing,  and  the  creation  of  surplus  value  was  not  a 


CIRCULATIOj^  of  commodities  127 

necessity  of  all  capitalist  production,  but  a  peculiarity  of 
agricultural  production  alone.  It  is  not,  however,  the 
longer  or  shorter  period  of  return  that  makes  the  difference, 
but  the  method  of  giving  over  the  value  to  the  product. 

Adam  Smith  extended  this  distinction  of  the  Physiocrats 
to  the  whole  field  of  capitalist  production  in  the  guise  of 
fixed  and  circulating  capital ;  but  both  he  and  Eicardo,  by 
confusing  "  fixed  and  circulating "  with  "  constant  and 
variable "  capital,  landed  themselves  and  their  followers 
in  a  series  of  mistakes. 

To  quote  Marx  again:  "  The  confusion  created  by  Adam 
Smith  in  tliis  matter  of  fixed  and  circulating  capital  has 
led  to  the  following  results: 

"1.  The  difference  between  fixed  and  circulating  capital 
is  confounded  with  the  difference  between  productive  cap- 
ital and  capital  in  the  form  of  commodities.  Thus,  for 
example,  the  same  machine  is  circulating  capital  if  it  is 
found  on  the  market  as  a  commodity,  and  fixed  capital,  if 
it  is  taken  into  the  process  of  production.  From  which  it 
is  absolutely  impossible  to  determine  why  one  particular 
sort  of  capital  should  be  more  fixed,  or  more  circulating, 
than  the  other. 

"  2.  All  circulating  capital  is  identified  with  the  capital 
expended,  or  to  be  laid  out,  on  wages  of  labour.  As  with 
John  Stuart  Mill  and  others. 

"  3.  The  difference  between  variable  and  constant  capi- 
tal which  was  already  used  by  Barton,  Eicardo  and  others 
as  convertible  with  that  between  circulating  and  fixed 
capital  is  at  length  reduced  entirely  to  those  cases  where 
all  means  of  production,  raw  material,  &c.,  as  well  as 
tools,  are  fixed  capital,  and  only  the  capital  laid  out  in 
wages  is  circulating  capital. 


128  THE  ECONOMICS  OF  SOCIALISM 

"4.  Amongst  the  most  recent  English,  and  especially 
Scotch  economists,  who  regard  everything  from  the  un- 
speakably narrow  standpoint  of  a  banker,  the  difference 
between  fixed  and  circulating  capital  is  twisted  into  money 
on  call  and  money  not  on  call." 

V.  Constant  Capital  is  that  portion  of  the  capital,  such 
as  the  value  of  the  wear-and-tear  of  the  buildings,  plant, 
machinery,  horses,  carts,  &c.,  the  value  of  the  raw  mate- 
rials, of  the  incidental  materials,  and,  in  fact,  the  value 
of  all  the  commodities  bought  and  taken  into  the  process 
of  production,  except  the  value  of  the  labour-power  —  of 
the  value-creating  commodity.  The  value  of  all  these  com- 
modities, whose  value  is  embodied  in  the  finished  product, 
without  change  of  such  value  during  the  process  of  pro- 
duction, no  matter  how  greatly  their  mere  form  may  be 
changed,  constitutes  constant  capital. 

This  category  of  capital  was  so  fully  dealt  with  in  the 
last  chapter  that  it  is  not  necessary  to  do  more  here  than 
point  out  the  difference  which  exists  between  constant 
capital  and  fixed  capital  on  the  one  side,  and  circulating 
capital  on  the  other.  Constant  capital,  so  far  as  it  relates 
to  buildings,  machinery,  and  tools,  represents  the  value  of 
the  actual  transfer  of  capital  to  the  commodity  during  the 
process  of  production.  It  consists  of  that  portion  of  the 
value  of  the  fixed  capital,  in  respect  of  the  wear-and-tear 
of  that  fixed  capital,  which  is  incorporated  in  the  quantity 
of  commodities  produced.  This  value,  whatever  it  may  be, 
small  or  large,  undergoes  no  increase  or  decrease  whatever 
during  the  process  of  production.  So  much  of  the  virtue  of 
the  original  plant  has  gone  out  of  it  in  doing  this  piece 
of  work,  and  has  been  transferred,  without  modification,  to 
the  finished  product.  Its  value  remains  constant,  there- 
fore; it  is  a  portion  of  the  constant  capital  in  the  finished 


CIECULATION  OF  COMMODITIES  129 

commodity,  having  been  a  portion  of  the  fixed  capital  be- 
fore the  process  of  production  began. 

In  like  manner,  the  value  of  the  raw  materials,  and 
incidental  materials,  is  incorporated,  without  change,  as 
part  of  the  constant  capital  embodied  in  the  finished  com- 
modity. Their  value,  that  is  to  say,  also  reappears  with- 
out change  in  this  completed  product  after  the  process  of 
production  is  at  an  end;  they  themselves,  as  commodities, 
having  formed  a  portion  of  the  Commodity-Capital,  pur- 
chased by  the  capitalist  with  money  at  the  beginning  of 
the  whole  operation.  From  that  Commodity-Capital,  it 
will  be  remembered.  Fixed  Capital  was  of  necessity  ex- 
cluded, and  Labour-Power,  the  value-creating  commodity, 
was  included,  labour-power  being  bought,  as  a  commodity, 
for  use  in  the  process  of  production,  like  other  commodities. 
On  the  other  hand,  constant  capital,  though  it  is  partially 
included  in  circulating  capital,  does  not  pomprise  its 
entire  constituents;  for  circulating  capital  includes  the 
embodiment  of  labour-power  in  labour-value,  which  formed 
a  portion,  not  of  the  constant  capital,  but  of  the  variable 
capital. 

VI.  Variable  Capital  is  the  capital  expended  by  the 
capitalist  in  the  purchase  of  labour-power  as  a  commodity. 
This  labour-power  so  purchased  is  then  made  use  of  in  the 
process  of  production,  for  the  purpose  not  merely  of  mak- 
ing commodities,  but  with  the  object  of  embodying  in  those 
finished  products  its  value  as  a  commodity  (which  value  to 
the  owner  of  the  labour-power  is  represented  by  the  money 
wages  paid  by  the  capitalist)  and  more.  "The  charac- 
teristic of  variable  capital  is  that  a  determined,  given  frac- 
tion of  capital,  a  definite  amount  of  value,  is  exchanged 
against  a  self -increasing,  value-creating  power  —  labour- 
power,  to  wit  ■^— which  not  only  reproduces  the  value  paid 


130  THE  ECONOMICS  OF  SOCIALISM 

for  it  by  the  capitalist,  but  likewise  produces  a  surplus 
value,  a  value  previously  non-existent  and  paid  for  by  no 
equivalent." 

This  variable  capital,  with  its  accompanying  surplus 
value,  contributed  by  the  labour-power  of  the  worker,  with- 
out remuneration,  during  the  process  of  production,  re- 
appears in  the  finished  commodities.  The  value  of  the 
wages  paid  in  money  to  the  worker  appears  in  these  fin- 
ished commodities,  before  the  commodities  are  converted 
into  money  again.  So,  likewise,  does  the  surplus  value 
appear  in  the  form  of  finished  commodities.  Both  por- 
tions of  the  product  being  indistinguishable  in  the  entire 
mass,  and  all,  of  course,  belonging  to  the  capitalist,  as 
now  his  circulating  capital.  When  the  commodities  are 
turned  into  money  the  value  of  the  variable  capital  and 
the  surplus  value  are  realised  in  money,  simultaneously 
with  the  realisation  of  the  constant  capital  in  money. 

VII.  Circulation  Capital.  This  form  of  capital,  ac- 
cording to  Marx's  nomenclature,  is  the  same  that  is  ordi- 
narily called  circulating  capital.  That  is  to  say,  it  is 
capital  which  whether  in  the  form  of  commodities  or  in 
the  form  of  money,  enters  into  exchange  and  passes  from 
hand  to  hand;  in  contradistinction  to  its  form  of  pro- 
ductive capital  as  which  it  figures  in  the  process  of  pro- 
duction. "  There  are  not  two  special  sorts  of  capital  into 
which  the  capitalist  divides  his  capital,  but  there  are  dif- 
ferent forms  which  the  same  capital-value  continually  as- 
sumes and  drops  one  after  the  other  in  its  course  through 
life." 

The  capital  which  is  expended  in  fixed  capital  is  eventu- 
ally circulated  in  the  product,  in  the  same  way  that  the 
capital  expended  in  commodities  is  circulated  in  the  prod- 
uct; and  both  are  similarly  converted  into  capital,  in  the 


CIECULATION  OF  COMMODITIES  131 

shape  of  money,  by  the  circulation  of  the  capital  in  the 
form  of  commodities.  No  profit  whatever  is  engendered 
merely  by  the  conversion,  through  exchange,  of  the  com- 
modities owned  hy  the  capitalist  into  money.  All  that 
takes  place  by  such  conversion  is  that  the  capitalist  realises 
his  original  advances,  together  with  his  surplus  value 
(which  includes  his  individual  profit)  in  the  form  of 
money ;  in  place  of  holding  them,  as  in  effect  he  cannot  do, 
in  the  form  of  commodities.  Both  the  money  and  the  com- 
modities .are  circulation  capital,  in  contradistinction,  and 
even  opposition,  to  productive  capital ;  but  they  are  not  in 
any  sense  circulating,  or  liquid,  capital  in  contradistinction 
to  fixed  capital. 

These,  then,  are  the  seven  categories  of  industrial  capi- 
tal which  whosoever  understandeth  thoroughly  the  same 
shall  be  economically  saved! 

Mercantile  capital,  which  is,  historically  speaking,  many 
centuries  older  than  industrial  capital,  stands  outside  these 
categories.  It  is  the  money  capital  used  by  the  merchant, 
as  the  buyer  of  commodities  and  trader  upon  differences  of 
value.  This  capital  so  used  creates  no  wealth  and  pro- 
duces no  surplus  value,  though  it  frequently  piles  up  riches 
for  its  possessor,  at  the  expense,  of  course,  of  the  pro- 
ducers and  buyers  of  the  commodities. 

If  now  our  capitalist,  being  obliged  to  sell  the  commodi- 
ties which  he  has  produced  for  money,  finds  that  all  goes 
well  with  him;  that  he  is  able  to  sell  his  product  readily; 
and  that  there  is  no  hitch  or  check  in  the  circulation  of  his 
commodities  —  how  does  he  stand  ?  He  has  got  back  again 
in  money  the  full  value  which  he  originally  expended  in 
money,  and  has  likewise  realised  his  surplus  value  in 
money.  Unless  he  intends  to  retire  from  business  alto- 
gether, he  is  bound  to  use  the  same  amount  of  money  that 


133  THE  ECOISTOMICS  OF  SOCIALISM 

he  did  before  in  purchasing  a  new  set  of  commodities  to 
produce  with.  That  is  outside  his  individual  volition. 
But  what  he  does  with  the  surplus  value  in  money,  or  so 
much  of  it  as  belongs  to  him,  is  a  matter  for  him  to  decide. 
He  can  either  expend  it  on  personal  enjoyment,  he  can 
invest  it  in  stocks,  he  can  accumulate  it,  or  he  can  put  it 
back  into  his  business. 

In  practice,  if  he  adopts  the  first  course,  he  will  probably 
soon  be  beaten  by  a  more  cautious,  or  more  enterprising, 
competitor.  The  rule  of  modern  competitive  production 
is  "  Get  bigger  or  burst."  It  is  a  hard  saying,  but  it  is 
of  universal  application.  If  he  does  not  absorb  and  digest 
his  competitors  they  will,  unless  he  possesses  a  monopoly, 
absorb  and  digest  him.  Moreover,  even  apart  from  this 
necessity,  he  will  require  a  reserve  fund,  to  provide  against 
any  delay  in  disposing  of  his  product.  So  that  the  second 
course,  of  investment,  or  deposit  in  a  bank,  is  the  one  which 
he  will  almost  certainly  adopt;  mere  accumulation,  miser- 
fashion,  being,  to  the  active  capitalist,  a  manifest  folly. 

But  the  business  cannot  be  extended  in  small  parts. 
The  capitalist,  no  matter  how  anxious  he  may  be  to  grow, 
can  only  add  to  his  factory,  workshop,  rolling-mills,  or 
shipyard  on  a  certain  scale,  proportionate  to  the  original 
scope  of  his  enterprise.  Until  this  point  is  reached,  his 
profits,  which,  after  making  due  provision  for  a  reserve 
fund,  he  proposes  to  devote  to  the  enlargement  of  his  opera- 
tions, must  remain  for  him  as  capital  in  a  state  of  sus- 
pended activity.  The  bankers,  to  whom  he  entrusts  it  for 
safe  keeping,  may  lend  it  to  other  capitalists  for  use  in 
their  business,  or  the  depositor  himself  may  borrow  from 
them  to  make  up  his  deficiency.  But  only  when  that 
minimum  sum  needed  for  extension  is  provided  can  the 
extension  take  place. 


CIRCULATION  OF  COMMODITIES  133 

Now,  this  law  of  capitalist  existence,  that  each  producer 
must  increase  his  scale  of  production  or  fall  by  the  way- 
side, means,  in  practice,  that  only  the  biggest  are  the  fit  to 
survive.  This  is  what  is  actually  taking  place.  Each 
capitalist  in  a  free,  competitive  market  is  ever  striving  to 
drive  his  competitor's  goods  out  of  the  channels  of  circula- 
tion, and  to  replace  them  by  his  own.  The  weapon  em- 
ployed in  this  commercial  war  is  cheapness.  And  the  proc- 
ess goes  on  and  on  until  competition  reaches  its  logical 
term  in  combination  and  monopoly:  in  an  agreement,  that 
is  to  say,  between  a  number  of  large  firms  not  to  undersell 
one  another,  when  they  have  once  obtained  control  of  the 
market,  but  to  crush  out  all  rivals  by  any  means;  or  in  an 
absolute  monopoly  of  production  and  distribution,  of  which 
at  present  there  are  already  some  examples. 

But  though  the  point  of  absolute  monopoly  has  been  at- 
tained in  comparatively  few  instances  even  in  the  United 
States  —  where,  owing  to  various  causes,  the  economic  de- 
velopment in  this  direction  is  in  advance  of  anything  to  be 
observed  elsewhere  —  the  growi;h  of  big  concerns  at  the 
expense  of  smaller  is  one  of  the  most  significant  features 
of  the  time  in  all  countries.  This  is  to  be  noted  not 
merely  in  production,  but  in  every  department  of  circula- 
tion and  distribution.  Combinations  and  trusts,  national 
and  international  stores,  and  national  and  international 
banks,  all  go  to  show  the  tendency  of  the  time. 

In  particular,  the  waste  of  the  unregulated  competitive 
system,  more  especially  in  the  matter  of  circulation  and 
distribution,  is  beginning  to  correct  itself.  At  the  pres- 
ent time  the  waste  of  labour  in  a  huge  number  of  small 
shops,  all  selling  the  same  goods,  with  an  infinity  of  petty 
advertisements  in  every  direction  puffing  those  goods,  mani- 
fests to  everyone  the  defects  of  our  distributive  system; 


134  THE  ECONOMICS  OF  SOCIALISM 

while  even  the  men  and  women  employed  waste  half  their 
labour  in  working  at  a  mechanical  disadvantage,  alike  in 
production  and  distribution.  As  the  capitalist  system 
goes  on,  however,  we  see  great  central  establishments, 
working  with  a  minimum  of  friction  and  with  branches 
extending  in  all  directions,  gradually  supplanting  the  petty 
producers  and  retailers  of  past  times,  the  waste  in  every 
direction  being  thus  lessened  more  and  more.  Thus,  as 
capitalism,  meaning  thereby  competitive  production  of  com- 
modities for  profit,  relentlessly  breaks  down  and  overpowers 
all  other  forms  of  production  throughout  the  world;  so 
now,  alike  in  production  and  in  distribution,  its  tendency  is 
to  break  down  itself  in  the  competitive  form. 

But  whether  production  and  distribution  are  conducted 
under  capitalism  on  a  large  scale  or  on  a  small  scale,  the 
system  itself  is  worked  on  the  same  lines.  It  is  of  the 
utmost  importance  to  the  capitalist  that  his  raw  materials 
shall  always  be  purchasable  in  sufficient  quantity,  and  that 
his  products  shall  have  a  ready  and  continuous  outlet  — 
that  the  circulation  of  commodities,  in  a  word,  should  pro- 
ceed continuously  and  without  check.  By  no  goodwill  of 
the  capitalist  himself,  assuredly,  does  any  interruption  oc- 
cur in  the  steady  circulation  of  his  capital.  All  who  par- 
ticipate in  his  surplus-value  are  equally  anxious  that  there 
should  be  no  hitch  to  deprive  them  of  their  share  of  it. 

But  the  demand  for  the  goods,  whether  for  those  to  be 
used  in  production,  or  for  the  products  themselves,  is  often 
fitful,  even  in  what  is  a  steady  market  on  the  whole. 
Consequently,  an  accumulation  of  commodities  in  ware- 
houses becomes  necessary,  not  as  a  condition  of  continuous 
sale,  but  as  a  consequence  of  the  temporary  unsalability 
of  the  commodities.  Nevertheless,  these  warehouses  as- 
sure, through  their  presence,  the  steady  continuance  of  the 


CIRCULATION  OF  COMMODITIES         135 

process  of  circulation  and  reproduction  of  commodities,  in 
normal  conditions,  as  a  reserve  of  money  is  a  necessity  for 
the  circulation  of  money ;  and  an  expenditure  of  capital  is 
called  for  in  either  case,  constituting  a  deduction  from  the 
total  social  wealth,  indispensable  as  their  existence  is. 

When  a  diiSculty  of  a  serious  character  arises  in  the  dis- 
posal of  products  for  money,  and  fresh  commodities  come 
forward  before  the  last  batch  has  been  sold,  then  the  ac- 
cumulation of  goods  increases  rapidly,  just  as  an  accumula- 
tion of  gold  is  brought  about  owing  to  a  similar  check  to 
the  circulation  of  money.  Then  we  have  a  glut,  either  at 
tbe  factories  themselves,  or  in  the  merchants'  storehouses. 
This  glut  arises  directly  from  the  antagonism  between  gold 
and  commodities ;  from  the  impossibility  of  converting  com- 
modities into  money  fast  enough  to  take  off  the  overplus. 
And  the  block  thus  occasioned  in  the  channels  of  circula- 
tion, as  will  be  seen  more  clearly  later,  not  only  involves 
a  temporary  suspension  of  the  exchange  of  commodities  all 
round  the  circle,  but  throws  the  machinery  of  production 
itself  out  of  gear. 

Once  more  let  it  be  repeated  that  continuous  production 
and  sale  of  commodities  for  money  is  an  indispensable  neces- 
sity of  the  capitalist  system.  But  necessary  warehousing, 
so  far  from  adding  to  the  value  of  commodities,  is  a  deduc- 
tion from  the  wealth  of  the  community,  partly  by  actual 
loss  in  storage,  partly  by  deterioration  of  quality,  and  partly 
by  the  labour  of  one  sort  or  another  which  the  mainte- 
nance of  the  warehouse  entails.  It  is  certain  that  nobody 
pays  any  more  for  goods  merely  because  they  have  been 
stored.  Wlien  the  market  is  ready  to  take  them,  the  stored 
goods  and  the  unstored  goods,  the  articles  produced  yester- 
day, or  the  articles  produced  months  ago,  fetch  precisely 
the  same  price,  provided  they  are  equally  good. 


136  THE  ECONOMICS  OF  SOCIALISM 

In  the  case  of  commodities  which  gain  in  quality  by 
keeping,  and  are  warehoused  or  stored  for  that  purpose,  the 
storage  becomes  part  of  the  entire  process  of  production, 
not  of  the  circulation;  and  the  risks  of  such  storage,  as 
in  the  case  of  wine  or  brandy,  &c.,  constitute  part  of  the 
cost  of  putting  them  upon  the  market.  Though,  in  these 
instances,  as  in  others,  a  stock  of  each  special  commodity 
is  needed,  apart  from  the  storage  for  improvement,  in 
order  to  meet  the  breaks  in  continuous  circulation. 

Transport  of  commodities  plays  a  great  part  in  the 
sphere  of  the  circulation  of  capital,  and  one  which,  since 
the  early  part  of  the  last  century,  has  increased  enormously 
with  each  succeeding  decade.  The  mere  fact  that  raw 
materials  are  now  transported  from  the  place  where  they 
are  grown,  or  mined,  to  the  centres  where  they  are  taken 
into  the  next  stage  of  production  and  manufactured,  and 
then  are  frequently  sent  back  again,  in  the  form  of  the 
completed  commodity,  to  the  very  spot  whence  they  origi- 
nally came  —  such  a  series  of  transfers  as  this  gives  the 
transport  of  goods  an  exceptional  place  in  modern  industry, 
as  also  it  has  rendered  the  development  in  the  direction  of 
railways  and  steamships  a  necessity. 

Thus,  raw  cotton  from  the  Southern  States  of  America, 
from  India,  from  Egypt,  finds  its  way  to  the  mills  of  Lan- 
cashire, Northern  France,  and  Germany,  and  then  the 
cotton  cloth  is  again  sold,  from  the  former  mills  at  any 
rate,  in  some  of  the  countries  from  which  the  raw  material 
has  come.  So,  in  like  manner,  with  the  Bilbao  iron-ore 
from  Spain,  with  copper  from  the  United  States,  Chili,  the 
Cape,  and  the  East,  with  silk  from  Italy,  France  and  China. 

These  raw  materials  are  imported  into  manufacturing 
countries,  and  then,  frequently,  the  finished  commodity 
is  retransported  back  to  the  countries  which  originally  pro- 


CIRCULATION  OF  COMMODITIES  137 

vided  the  raw  materials.  Even  in  the  United  States  it- 
self, which  is  more  self-dependent  in  the  matter  of  raw 
materials  than  any  other  country,  these  raw  materials,  when 
produced,  are  carried  by  rail  thousands  of  miles  to  the 
manufacturing  centres,  where  they  are  transformed  into 
finished  commodities,  and  are  then  transported  in  that 
shape  back  again.  At  the  same  time,  the  necessities  of 
trade  break  down  all  national  boundaries,  and  the  farming 
lands  which  supply  Great  Britain,  not  only  with  all  sorts 
of  raw  materials,  but  with  wheat,  meat,  butter,  eggs,  fowls, 
fruit,  are  situated,  in  some  cases,  hundreds,  and  in  other 
cases,  thousands,  of  miles  from  our  shores. 

Now  it  is  clear  that  mere  transport  of  itself  does  not 
necessarily  add  value  to  a  commodity.  If  it  did,  and  a 
certain  school  of  Anglo-Indian  economists  reason  as  if  they 
soberly  held  the  view  that  transport  of  itself  does  create 
value,  then,  clearly,  the  farther  we  send  all  sorts  of  goods 
the  more  they  will  fetch.  This,  however,  is  manifestly 
absurd. 

Necessary  transport  is  different.  The  utility  of  things 
can  only  be  made  effective  by  consumption,  and  their  con- 
sumption may  necessitate  their  removal,  and  therefore  de- 
mand the  complementary  process  of  production  involved 
in  transport.  Such  transport  can  be  watclied  in  the  actual 
process  of  production  itself.  Coal  at  the  pit's  mouth  repre- 
sented a  value  in  money  of,  let  us  say,  twelve  to  fourteen 
shillings  a  ton.  A  factory  close  by  can  obtain  it  at  that 
price  plus  the  cost  of  transporting  it,  probably  a  few  pence : 
to  a  factory  thirty  miles  further  off,  with  no  nearer  supply 
of  coal  than  the  same  pit,  the  cost  of  similar  coal  is  in- 
creased by  the  amount  expended  in  transport,  probably  two 
shillings  or  more  a  ton,  whether  this  be  done  by  railway, 
tramway,  barge,  ship  or  waggon.     The  transport  of  com- 


138  THE  ECONOMICS  OF  SOCIALISM 

pleted  products  follows  the  same  rule,  and  the  productive 
capital  embarked  in  the  transport  industry  gives  value  to 
the  product,  partly  through  the  wear-and-tear  of  the  means 
of  transport,  and  partly  through  the  direct  labour  expended. 
This  latter  portion  of  the  contributed  value  is  divided,  as 
the  directly  productive  labour  is  divided,  into  the  value  of 
the  wages  paid  to  the  labourers  and  the  surplus  value  which 
is  obtained  from  their  incorporarted  but  unpaid  labour. 

All  this  means  that  whereas  the  expenditure  of  capital  on 
advertising,  sorting,  grading,  warehousing,  and  packing 
commodities,  in  order  to  facilitate  their  exchange  into 
money,  adds  nothing  to  their  value,  but  constitutes  merely 
a  deduction  from  the  total  surplus  value,  transport  stands 
in  a  different  category.  Transport  increases  the  value  of 
a  commodity,  in  so  far  as  it  takes  the  cheapest  method  to 
bring  it  from  where  there  is  no  market  to  where  its  social 
utility  can  be  made  effective.  And  as  the  quantity  of  la- 
bour needed  to  effect  such  transport  is  lessened  the  addi- 
tional value  due  to  transport  is  decreased.  But,  manifestly, 
if  goods  are  sent  to  a  market  merely  for  realisation  at  what 
they  will  fetch,  the  transport  can  add  no  value  to  them 
which  will  save  the  transmitter  from  loss. 

It  may  not  be  out  of  place  to  point  out  here  the  influ- 
ence which  improved  transport  on  the  one  hand,  and  ex- 
cessive railway  rates  due  to  antiquated  appliances  or  sheer 
monopolist  greed  on  the  other  produces  on  the  circulation 
of  commodities;  how  also  a  great  railway  company,  or  a 
combination  of  railway  companies,  can  isolate  an  entire 
region  and  produce  as  great  an  effect  in  the  direction  of 
limiting  that  free  competition,  or  free  trade,  which  is  taken 
as  the  basis  of  capitalist  production  in  an  advanced  stage, 
as  any  hostile  tariff  that  was  ever  imposed. 

Thanks  to  the  great  improvement  in  steam-engines  and 


CIRCULATION  OF  COMMODITIES         139 

mechanical  appliances,  by  land  and  sea,  it  is  now  possible 
to  transport  goods  in  quantity  from  the  remotest  parts  of 
the  world  at  a  cost  at  which  it  would  have  been  impossible 
to  carry  similar  goods  ten  or  twenty  miles  under  the  old 
conditions.  The  contrast  between  the  two  systems  and  the 
hindrance  to  circulation  which  the  old  system  involves  is 
felt  in  practice  the  moment  any  new  district  is  opened  up 
to  mining,  agriculture  or  commerce  in  any  part  of  the 
world. 

West  Australia  and  parts  of  South  Africa  afford  striking 
evidence  of  this  with  respect  to  mining.  Brazil  is  a  still 
more  striking  example  with  regard  to  agriculture.  Where 
lines  of  railways  are  driven  into  that  country  from  ports 
on  the  coast  coffee  plantations  and  other  plantations  speed- 
ily spring  up.  They  cease  where  the  railway  ceases,  and 
sometimes  before,  if  the  rates  for  transport  are  too  high. 
In  China,  the  lack  of  railways  has  confined  the  main  com- 
merce of  that  huge  empire  to  the  lines  of  water  communi- 
cation. But  in  the  United  States,  where  railway  transport 
has  reached  a  point  far  in  advance  of  that  attained  in  any 
other  country,  the  railways  are  now  even  more  important 
than  the  rivers  and  canals,  as  agents  in  facilitating  the 
circulation  of  commodities.  More  remarkable  still,  per- 
haps, was  the  reduction  of  freights  by  the  great  ocean- 
going steamers  and  sailing-vessels  prior  to  the  war. 

The  effect  of  cheapened  freights  is  very  marked  in  in- 
tensifying the  competition  of  over-sea  products  with  home- 
grown products  in  all  European  Countries,  but  more  par- 
ticularly in  Great  Britain.  Taking  the  cost  of  transport 
of  commodities  as  the  basis  of  comparison,  it  was  the  fact 
that,  owing  to  the  high  rates  charged  by  the  English  rail- 
ways, Australia,  Canada,  the  wheat  centres  of  Canada,  a 
great  portion  of  the  Xorth-West  district  of  India,  and  even 


140  THE  ECONOMICS  OF  SOCIALISM 

the  vast  wheat-producing  areas  of  the  Mississippi,  Missouri 
and  Saskatchewan  were,  reckoned  by  freight,  within  the 
thirty-mile  radius  of  London.  That  is  to  say,  grain,  fruit, 
pork,  meat,  &c.,  grown  in  these  regions,  within  easy  dis- 
tance of  railway,  were  as  near  to  the  London  market,  so  far 
as  the  cost  of  transport  is  concerned,  as  the  inhabitants  of 
towns  in  the  Home  counties.^  The  English  railways, 
therefore,  so  far  from  facilitating  the  circulation  of  home- 
produced  or  home  grown  commodities,  directly  hamper  such 
circulation  and  act  as  a  heavy  protective  agency  in  favour 
of  foreign  produce. 

But  not  content  with  thus  impeding  circulation  by  their 
rates  of  freight,  English  railway  companies  have  delib- 
erately shut  out  this  or  that  district  from  convenient  trans- 
port in  order  to  favour  another.  This  occurred  not  many 
years  ago  in  Great  Britain  with  reference  to  the  South 
Yorkshire  coal-field,  and  in  the  United  States  in  regard 
to  a  portion  of  the  bituminous  coal-field  of  Pennsylvania. 
As  to  the  cost  of  transport  of  commodities  also  special 
rates  have  frequently  been  made  by  companies  for  special 
customers,  thus  ensuring  the  injury  or  even  the  ruin  of 
their  rivals.  This  whole  subject  of  transport  is  of  crucial 
importance  in  the  circulation  of  commodities,  as  is  seen, 
more  especially,  in  relation  to  the  circulation  of  agricul- 
tural products.  But  up  to  the  present  time  the  social 
character  of  the  function  performed  by  railways,  canals, 
&c.,  has  been  no  more  recognised  than  the  social  character 
of  production  has  been  admitted. 

In  the  circulation  of  capital  and  commodities  we  have  to 

1  In  my  evidence  before  the  Royal  Labour  Commission,  given 
thirty  years  ago,  I  showed  that  a  cask  of  lager  beer  could  be  sent 
from  St.  Louis  to  London,  4,200  miles,  for  less  than  a  sack  of 
potatoes  could  be  brought  from  Devizes. 


CIECULATION  OF  COMMODITIES  141 

consider  not  only  the  time  occupied  in  production  but  also 
in  realisation:  the  two  together,  the  period  of  production 
and  the  period  of  circulation,  representing  the  total  time  of 
the  turnover.  Now  the  differences  between  the  time  of 
production  in  different  branches  of  industry  are  in  prac- 
tice endless,  and  the  period  of  the  turnover  is  thus  directly 
affected.  And  the  result  of  this  in  such  varying  circum- 
stances is  that  between  cotton  cloth  which  is  perhaps  thrown 
on  the  market  every  week,  or  a  locomotive  which  will  take 
three  months  to  construct,  or  a  ship  which  may  take  a 
year,  or  agricultural  products  which  may  take  a  like  period, 
or  raising  cattle,  which  may  occupy  several  years,  the  vary- 
ing labour-period  exercises  a  great  influence  upon  the 
whole  operation. 


CHAPTER  V 

PROFIT 

In  previous  chapters  the  division  of  the  value  of  the 
social  product  between  the  contending  classses  which  make 
up  modern  society  has  been  neglected.  At  most  we  have 
considered  the  labourers  and  the  capitalists  as  two  antag- 
onistic sections  of  that  society:  the  former  producing  by 
their  labour  all  the  wealth  that  is  produced,  in  return  for 
wages  which  represent  no  more  than  a  moderate  subsist- 
ence, and  sometimes  not  even  that :  the  latter  appropriating 
all  the  value  incorporated  in  commodities  by  the  labour 
of  these  wage-earners.  The  surplus-value  created  by  the 
unpaid  labour  of  the  workers,  over  and  above  the  return 
of  the  original  wages  paid  and  constant  capital  advanced, 
being  taken  in  the  first  instance  by  the  capitalists  directly 
engaged  in  tlie  process  of  production,  and  then  being 
divided  up  with  others  who  may  be  regarded  as  active  or 
sleeping  partners  in  the  business. 

The  most  important  of  these  participators  in  the  total 
surplus  value  created  by  social  labour  and  appropriated  by 
employers,  or  by  groups  of  employers  in  the  form  of  share- 
holders, are  the  landlords  and  interest  receivers.  Land- 
lords take  their  share  by  reason  of  their  individual  owner- 
ship of  the  soil,  in  the  shape  of  what  we  call  rent.  Bankers, 
traders,  merchants,  and  others  receive  their  portion,  by 
reason  of  the  social  conventions  which  give  them  control 
of  money  and  credit,  chiefly  in  the  shape  of  what  we  call 
interest.  The  remainder  falls  to  the  employer  as  profit. 
It  is  this  last  which  we  shall  investigate  first. 

142 


PEOFIT  143 

Profit,  the  creation  and  increase  of  profit,  is  the  motive 
power  of  the  whole  capitalist  system  of  production.  Al- 
though capitalists  produce  articles  of  social  use,  in  the 
society  where  they  act  as  the  agents  of  production,  this 
social  utility  is  for  them  quite  a  secondary  matter.  Whole- 
someness,  purity,  a  high  standard  of  nourishment,  fine 
quality  of  clothing,  &c.,  carry  no  weight  whatever  with 
them,  except  in  so  far  as  these  features  in  commodities 
facilitate  rapidity  of  sale,  and,  therefore,  of  realisation  of 
profit,  for  their  benefit.  If  inferior  goods  of  any  kind 
command  a  more  satisfactory  profit,  as  the  result  of  pro- 
duction and  exchange,  than  goods  of  a  superior  grade,  then 
the  former  will  be  produced  in  preference  to  the  latter. 
Thus  production  for  exchange,  regardless  of  the  actual 
worth  to  the  eventual  purchaser  and  consumer,  dominates 
the  entire  field  of  capitalist  industry.  The  lowest  possible 
quality  of  deleterious  but  saleable  gin  is,  for  them,  on  the 
same  plane  as  the  very  best  description  of  agreeable  and 
strengthening  wine  —  so  long  as  the  poisonous  alcohol  is 
easily  and  profitably  disposed  of. 

Moreover,  the  capitalists  themselves,  as  well  as  the  wage- 
earners  they  employ,  have  no  control  whatever  over  the 
articles  which  they  have  produced  for  sale.  The  commodi- 
ties go  out  upon  the  market  for  exchange,  and  realisation 
for  profit,  and  when  that  is  done,  all  command  over  them 
passes  to  others.  These  articles  likewise  are  of  no  use  to 
those  who,  as  wage-earners,  turn  them  out  for  the  capital- 
ists: the  capitalists  and  the  workers  themselves,  with  their 
means  of  creating  wealth,  are  merely  the  animate  and  inani- 
mate means  whereby  raw  materials  are  converted  into  ex- 
changeable wares,  or  goods,  which  comprise  in  themselves 
the  power  to  be  exchanged,  to  be  sold  for  money,  to  realise 
the  amount  of  value  in  all  the  capital  paid  out  for  wear- 


144  THE  ECONOMICS  OF  SOCIALISM 

and-tear  of  machinery  and  tools,  raw  materials,  incidental 
materials,  depreciation  of  buildings,  waggons,  &c.,  and 
wages,  plus  the  additional  labour-value  embodied  in  the  ex- 
changeable articles  to  be  sold.  For  which  last  no  wages 
have  been  paid,  nor  any  other  consideration  has  been 
given. 

This  surplus  quantity  of  commodities  constitutes  the 
surplus  value,  or  gross  profit,  which  is  the  sole  reason  why 
the  entire  industrial  operation  was  entered  upon  and  car- 
ried through.  Such  gross  profit  brought  to  being  in  the 
process  of  industry  is  the  property  in  the  first  instance  of 
the  individual  capitalist  himself,  subject  to  deductions,  in 
the  overwhelming  majority  of  cases.  The  net  profit  of  the 
capitalist,  that  is  to  say,  can  only  be  arrived  at  after  rent 
has  been  paid  and  interest  on  money  borrowed  has  been  sub- 
tracted, when  his  commodities,  including  the  surplus  value 
or  gross  profit,  have  been  realised  in  money. 

But  the  rate  of  profit,  whether  gross  or  net,  is  very  dif- 
ferent, as  we  have  already  seen,  from  the  rate  of  surplus 
value,  or,  in  other  words,  is  very  different  from  the  ratio 
of  unpaid  to  paid  labour.  Furthermore,  the  rate  of  sur- 
plus value,  which  is  the  measure  of  the  exploitation  of 
labour  that  the  capitalist  is  carrying  on,  may  remain  pre- 
cisely the  same,  or  even  increase,  while  the  rate  of  profit  is 
very  much  reduced. 

Now  the  average  rate  of  profit  is  continually  falling  in 
all  civilised  countries.  Superficial  observers,  therefore, 
commonly  contend  that  the  wage-earners  in  those  coun- 
tries must,  of  necessity,  as  a  class,  be  obtaining,  apart  from 
any  obvious  rise  in  wages  relatively  to  the  cost  of  sub- 
sistence, a  constantly  increasing  share  of  the  national  prod- 
uct of  industry,  as  compared  with  the  share  that  is  realised 
and  appropriated  by  the  capitalist  class.    This  may  even 


PROFIT  145 

appear,  at  first  sight,  a  reasonable  contention,  and  accumu- 
lation of  capital  therefore  becomes  a  mystery. 

The  rate  of  profit,  however,  is  invariably  reckoned  upon 
the  whole  of  the  capital  embarked  in  any  enterprise.  Not 
upon  that  portion  of  the  capital  which  is  used  for  pur- 
chasing labour-power  and  paying  wages,  but  upon  the  con- 
stant capital  and  the  variable  capital  taken  together.  But 
the  increasing  tendency,  throughout  the  field  of  capitalist 
production,  is  that  the  amount  of  constant  capital  —  capi- 
tal embarked  in  machinery,  raw  material,  &c.,  —  should 
grow  relatively  to  the  amount  of  variable  capital  expended 
—  the  capital  used  to  pay  wages  —  embarked  in  the  pur- 
chase of  labour-power.  This  is  due  to  the  larger  amount  of 
machinery  used,  demanding  heavier  supplies  of  raw  mate- 
rial, &c.,  as  processes  of  industry  are  improved  by  new 
inventions,  and  the  whole  business  of  capitalism  is  con- 
ducted upon  a  larger  scale. 

Thus,  in  a  furniture  factory  where  £50,000  is  the  total 
capital  embarked  in  the  business  we  may  have  £35,000 
employed  as  constant  capital  for  machinery,  buildings,  raw 
materials,  incidental  materials,  and  so  on,  with  £25,000 
used  to  purchase  labour-power.  Let  us  assume  that  the 
rate  of  the  exploitation  of  labour,  that  is  of  surplus  value 
or  unpaid  labour  to  paid  labour,  is  one  hundred  per  cent. 
There  will  then  be  £25,000  of  unpaid  labour,  surplus  value, 
or  gross  profit,  embodied  in  the  completed  articles  of  furni- 
ture which  belong  to  the  capitalist,  and  the  rate  of  gross 
profit  on  the  entire  capital  embarked  will  be  £25,000  upon 
£50,000,  or  50  per  cent. 

Now  let  improved  and  more  costly  machinery  be  set  up, 
calling  for  larger  or  better  buildings  with  a  corresponding 
increase  in  the  amount  of  raw  materials,  in  this  case 
wood,  used  in  the  process  of  production.     Then  we  may 


146  THE  ECONOMICS  OF  SOCIALISM 

assume  that  this  constant  capital  will  represent  no  longer 
£25,000  but  £40,000  out  of  the  total  £50,000  and  the  varia- 
ble capital  available  for  paying  wages  will  fall  to  £10,000 
instead  of  £35,000:  the  rate  of  exploitation  of  labour  re- 
maining as  before  100  per  cent.  Therefore  the  surplus 
value  of  unpaid  labour  embodied  in  the  articles  of  fur- 
niture as  a  whole  falls  to  £10,000.  This  shows  only  20 
per  cent,  upon  the  same  total  capital,  namely,  £50,000; 
though  the  smaller  number  of  wage-earners  still  employed 
provide  the  same  ratio  of  unpaid  to  paid  labour  embodied 
in  the  articles  of  furniture  that  they  did  before.  They 
gain  nothing  whatever  by  the  fall  in  the  rate  of  profit  cal- 
culated on  the  total  capital, 

Now  this  process  of  the  increase  of  the  proportion  of 
constant  capital  to  variable  capital  is,  as  said,  steadily 
extending  in  every  department  of  productive  industry  as 
the  whole  system  of  capitalism  itself  extends.  Constant 
capital,  which  engenders  no  surplus  value,  is  growing  pro- 
portionally to  the  variable  capital  which  alone  engenders 
surplus  value.  Nor  is  this  tendency  materially  changed, 
though  it  may  be  temporarily  affected,  by  the  cheapening  of 
the  elements  of  constant  capital,  machinery,  buildings,  raw 
materials,  incidental  materials,  waggons,  and  so  forth. 
Consequently,  the  tendency  of  the  rate  of  profit  is  to  fall  in 
all  capitalist  countries,  though  the  rate  of  surplus  value, 
namely,  of  unpaid  to  paid  labour,  may  remain  unchanged. 

This  whole  tendency  of  the  rate  of  profit  to  fall  in  all 
highly-developed  capitalist  countries  is  set  forth  by  Marx 
as  follows: 

"  Given  the  rate  of  wages  and  the  working-day,  a  varia- 
ble capital  of  £100,  let  us  say,  sets  in  motion  a  fixed  number 
of  labourers:  it  constitutes  the  criterion  of  this  number. 


PEOFIT  147 

For  example,  let  £100  be  the  wages  of  100  labourers,  say 
for  one  week.  If  tliese  100  labourers  perform  just  as  much 
necessary  labour  as  surplus  labour,  they  daily  work  as  much 
time  for  themselves,  that  is  for  the  reproduction  of  their 
wages,  as  for  the  capitalist,  namely,  for  the  production  of 
surplus  value;  their  total  production  in  value  is  equal  to 
£200,  and  the  surplus  value  they  have  produced  amounts  to 
£100.  The  rate  of  surplus  value,  consequently,  the  ratio 
of  unpaid  to  paid  labour  embodied  in  commodities,  would 
be  one  hundred  per  cent.  (100  %).  This  rate  of  surplus 
value,  cent,  per  cent.,  would,  nevertheless,  express  very  dif- 
ferent rates  of  profit  according  to  the  varying  size  of  the 
constant  capital  employed  relatively  to  the  total  capital 
embarked.  Thus,  the  rate  of  surplus  value  being  one 
hundred  per  cent. : 

"  If  the  constant  capital  is  represented  by  a  money  value 
of  £50,  and  the  variable  capital  by  a  money  value  of  £100, 
then  the  rate  of  profit  on  the  above  assumption  represents 
the  ratio  which  £100,  the  total  amount  of  surplus  value 
produced,  bears  to  the  entire  amount  of  constant  capital 
and  variable  capital  together  employed.  This  is  £150. 
The  rate  of  profit  in  this  case,  therefore,  is  in  the  propor- 
tion of  100  to  150,  or  66%  per  cent. 

"  But,  now,  if  the  constant  capital  is  increased  to  £100 
under  the  same  conditions,  the  rate  of  profit  is  the  ratio 
which  £100,  the  total  amount  of  surplus-value  produced, 
bears  to  £200,  the  entire  capital  employed.  The  rate  of 
profit  here,  then,  the  same  rate  of  surplus-value  being  main- 
tained, is  not  cent,  per  cent.,  or  66%  per  cent.,  but  the  rela- 
tion which  100  bears  to  200,  or  50  per  cent. 

"  So,  again,  if  the  constant  capital  rises  to  £200,  the 
variable  capital  still  remaining  at  £100,  and  the  rate  of 


148  THE  ECONOMICS  OF  SOCIALISM 

surplus-value  being  still  cent,  per  cent.,  or  also  £100,  the 
rate  of  profit  falls  still  further,  and  is  as  £100  to  £300,  or 
33^/^  per  cent. 

"  Once  more,  when  the  constant  capital  reaches  the 
amount  of  £300,  the  rate  of  profit  is  as  £100  to  £400,  or 
only  25  per  cent. 

"  As  a  last  illustration,  take  the  constant  capital  at  £400. 
This,  added  to  the  variable  capital  of  £100  used  to  pay  the 
wages  of  the  100  labourers,  gives  a  total  capital  of  £500. 
The  surplus-value  is  still  £100.  Here,  therefore,  the  rate 
of  profit  falls  still  more,  and  is  represented  by  the  relation 
of  £100  to  £500,  or  20  per  cent. 

"  Thus,  the  same  rate  of  surplus-value,  accompanied  by 
an  unchanged  scale  of  exploitation  of  labour,  would  express 
itself  in  a  falling  rate  of  profit;  because  the  amount  of 
tKe  value  of  the  constant  capital,  and  together  with  this 
the  amount  of  value  of  the  total  capital,  grows  with  its 
own  material  bulk,  though  not  in  the  same  proportion." 

Hence,  says  Marx,  further,  "  the  progressive  tendency 
of  the  general  rate  of  profit  to  fall  is  only  an  appropriate 
expression  of  the  capitalist  system  of  production  for  the 
advancing  development  of  the  social,  productive  power  of 
labour."  He  adds  that  the  whole  school  of  political  econ- 
omists, professors  and  pupils  alike,  outside  the  Socialists, 
"  have  failed  to  expound  or  explain  this  law  " —  of  the 
falling  rate  of  profit  — "  because  they  are  incapable  of 
formulating  the  distinction  between  constant  and  variable 
capital  in  an  intelligible  and  practical  shape;  and  they 
cannot  separate  rate  of  surplus  value  from  rate  of  profit, 
or  discriminate  between  gross  profit  as  a  whole  and  its 
various  independent  portions,  such  as  industrial  profit, 
ground-rent  and  interest." 

This  is  as  true  to-day  of  the  general  theorists  of  political 


PROFIT  149 

economy  in  Great  Britain,  outside  the  Marxist  school,  as 
it  was  when  Marx  wrote.  Not  a  single  one  of  our  academic 
economists  has  contributed  anything  of  real  value  to  any 
portion  of  Marx's  analysis,  though  many  of  them  have 
exhausted  their  energies  in  futile  endeavours  to  frame  an 
economic  basis  of  capitalism  which  shall  scientifically  con- 
ceal the  wholesale  exploitation  of  labour.  There  is,  how- 
ever, no  possible  explanation  of  the  falling  rate  of  profit, 
concurrent  with  an  equal  or  even  an  improved  remuneration 
of  the  workers,  and  a  larger  return  to  capital  as  a  whole, 
than  the  solution  propounded  by  Marx. 

Hitherto,  the  operation  of  the  capitalist  system  has  been 
mainly  considered  from  the  point  of  view  of  production 
and  realisation  by  an  individual  employer,  or  company. 
Now,  in  considering  the  general  distribution  of  surplus 
value,  or  gross  profit,  and  the  establishment  of  an  average 
rate  of  profit  for  all  capital  embarked  in  productive  busi- 
ness, the  matter  must  be  regarded  from  the  point  of  view 
of  capital  as  a  social  and  not  merely  as  an  individual 
economic  force.  Thus,  returning  to  two  producers  of  fur- 
niture, one  manufacturing  his  cabinets,  chairs,  tables,  &c., 
by  the  old  hand-work  process  and  another  with  the  best 
improved  machinery,  both  using  the  same  quality  of  wood 
and  turning  out  —  which  is  quite  possible  —  identically 
similar  articles  in  the  same  quantity  for  sale  upon  the 
market,  the  following  is  obviously  the  position : 

(a)  The  second  producer  will  have  relatively  a  much 
larger  proportion  of  his  active  industrial  capital  employed 
as  constant  capital  —  machinery,  raw  material,  incidental 
materials,  &c. —  and  a  much  smaller  proportion  of  his 
entire  capital  embarked  in  the  form  of  variable  capital  — 
payment  of  wages  for  the  purchase  of  labour-power  —  than 
the  first  producer  of  furniture. 


150  THE  ECONOMICS  OF  SOCIALISM 

(b)  "Whatever  the  total  amount  of  capital,  constant  and 
variable  together,  may  be  (which  is  assumed  to  be  the  same 
for  both  producers)  upon  which  the  rate  of  profit  has  to  be 
reckoned,  obviously  the  first  producer  is  paying  very  much 
more  in  wages,  that  is  to  say,  his  variable  capital  is  much 
larger  in  proportion  to  his  constant  capital,  than  that  of  the 
second  producer.  Therefore  the  amount  of  surplus  value 
embodied  in  his  commodities  in  the  shape  of  unpaid  labour 
is  much  greater  in  the  case  of  the  producer  who  manufac- 
tures furniture  in  the  old-fashioned  way  than  in  the  case 
of  the  capitalist  using  improved  machinery.  That  is  be- 
yond dispute. 

(c)  When,  however,  manufactured  furniture  of  the  same 
quality  is  placed  upon  the  market,  it  is  manifest  that  the 
two  sets  of  goods  will  fetch  the  same  price.  What  has 
happened  ?  The  social  power  of  reproduction,  with  the 
less  expenditure  of  labour,  comes  behind  the  two  sets  of 
commodities  and  equates  them  in  exchange. 

(d)  Hence  the  furniture-manufacturer  working  with 
the  larger  amount  of  constant  capital  and  the  less  amount 
of  variable  capital  takes  to  himself  in  realisation  a  large 
proportion  of  tlie  unpaid  labour  embodied  in  commodities, 
in  this  case  furniture,  which,  in  the  first  instance,  nom- 
inally belongs  to  the  capitalist  who  turns  out  furniture 
merely  by  the  labour  of  hand-workers,  without  machinery. 

(e)  Obviously,  the  "organiser  of  labour"  who  sticks 
to  the  old  process  must  ere  long  be  driven  out  of  the 
market  by  the  more  advanced  employer  of  labour,  although 
his  quantity  of  surplus  value  to  begin  with  is  greater  than 
that  of  his  competitor. 

(f )  This  simple  process,  clear  enough  in  theory,  is  being 
applied  all  through  the  market  in  various  departments  in 
actual    practice.     Capital    using    on    the    average    larger 


PROFIT  151 

amounts  of  constant  capital  will  inevitably  as  a  rule  com- 
mand the  market  as  against  the  same  total  amount  of 
capital  producing  with  smaller  amounts  of  constant  cap- 
ital. The  larger  the  constant  capital  the  greater  the  rela- 
tive gain  to  the  capitalist,  though  the  rate  of  profit,  on  the 
total  capital  employed,  is  steadily  falling  all  the  time. 
Simple,  abstract  social  human  labour,  engaged  in  produc- 
ing the  various  commodities  for  profit,  with  the  surplus 
value  simultaneously  created  by  the  unpaid  labour  em- 
bodied therein,  forms  the  basis  of  the  entire  system. 

(g)  It  is  the  competition  of  capitals  engaged  in  the 
different  branches  of  industry  which  establishes  the  average 
rate  of  profit  throughout.  This  average  rate  of  profit  in 
nowise  conflicts  with  the  labour  theory  of  values,  but,  on 
the  contrary,  confirms  it. 

But  in  the  general  survey  of  capitalist  production  and 
average  rate  of  profit  we  have  not  to  deal  with  segregated 
instances  of  capital  of  higher  composition,  that  is  to 
say  capital  employing  more  constant  capital,  and  capital  of 
lower  composition,  using  less  constant  capital,  in  direct 
competition  with  one  another  on  the  field  of  realisation. 
The  competition  covers  the  whole  area  of  the  production  of 
commodities  for  profit  under  the  capitalist  system.  Here 
the  general  social  effect  of  this  system  comes  into  play. 

It  is  thus  put  by  Marx :  "  Although  capitalists  in  the 
various  spheres  of  production  recover  the  value  of  the  cap- 
ital used  up  in  the  production  of  their  commodities,  by 
the  sale  of  these  commodities,  they  do  not  obtain  the  sur- 
plus value  or  the  gross  profit  created  in  their  own  sphere  by 
the  production  of  these  same  commodities,  but  only  as 
much  surplus  value  and  profit  as  falls  to  the  share  of  every 
portion  of  the  total  social  capital  out  of  the  total  social  sur- 
plus-value, or  social  gross  profit,  produced  by  the  total  cap- 


152  THE  ECONOMICS  OF  SOCIALISM 

ital  of  society  in  all  spheres  of  production.  Every  100  of 
any  invested  capital,  whatever  may  be  its  organic  composi- 
tion, draws  as  much  profit  during  one  year,  or  any  other  pe- 
riod of  time,  as  falls  to  the  share  of  every  100  of  the  total 
social  capital  during  the  same  period.  The  various  capital- 
ists, so  far  as  profits  are  concerned,  are  so  many  shareholders 
in  a  share  company  in  which  the  portions  of  profit  are  uni- 
formly divided  for  every  100  shares  of  capital,  so  that  profits 
differ  in  the  case  of  the  individual  capitalists  only  according 
to  the  amount  of  capital  invested  by  them  in  the  social 
enterprise,  according  to  their  investment  in  social  produc- 
tion as  a  whole. 

"  That  portion  of  the  price  of  commodities  which  buys 
back  the  materials  of  capital  used  up  in  the  production  of 
commodities,  in  other  words  their  cost  price  " —  [the  con- 
stant capital,  raw  materials,  incidental  materials,  wear-and- 
tear  of  machiner}^,  &c.,  and  variable  capital  in  the  shape  of 
wages  actually  paid  out]  —  "  depends  upon  the  investment 
of  capital  required  in  each  particular  sphere  of  production. 
But  the  other  element  of  the  price  of  commodities,  the  per- 
centage of  profit  added  to  this  cost  price,  does  not  depend 
upon  the  mass  of  profit  produced  by  a  certain  capital  during 
a  definite  time  in  its  own  sphere  of  production,  but  on  the 
mass  of  profit  allotted  for  any  period  to  each  individual 
capital  in  its  function  as  part  of  the  total  social  capital 
invested  in  social  production. 

"  A  capitalist  selling  his  commodities  at  the  price  of 
production  recovers  money  in  proportion  to  the  value  of  the 
capital  used  up  in  their  production  and  obtains  profits  in 
proportion  to  the  part  which  his  capital  represents  in  the 
total  social  capital.  His  cost  prices  are  definite.  But  the 
profit  added  to  his  cost-prices  is  independent  of  his  partic- 


PROFIT  153 

ular  domain  of  production,  for  it  is  a  simple  average  per 
100  of  invested  capital." 

Here  the  difference  between  the  actual  cost  of  production, 
and  the  price  of  production  with  average  profit  added,  is 
set  out. 

This  had  been  previously  expounded  more  elaborately  as 
follows.  C  in  the  tables  stands  for  constant  capital  and 
V   for  variable  capital. 

"Let  us  compare  five  different  spheres  of  production, 
and  let  the  capital  in  each  one  have  a  different  organic 
composition,  as  follows : 


Rate  of  Sur- 

iSurplus 

Value  of 

Rate  of 

Capitals 

plus  Value 

Value 

Product 

Profit 

I. 

80c 

20v 

100% 

20 

120 

20% 

II. 

70c 

30v 

100% 

30 

130 

30% 

III. 

60c 

40v 

100% 

40 

140 

40% 

IV. 

85c 

15v 

100% 

15 

115 

15% 

V. 

95c 

5v 

100% 

5 

105 

5% 

"Here  we  have  considerably  different  rates  of  profit  in 
different  departments  of  production  with  the  same  degree  of 
exploitation,  corresponding  to  the  different  organic  compo- 
sition of  these  capitals. 

"The  grand  total  of  the  capitals  invested  in  tliese  five 
spheres  of  production  is  500;  the  grand  total  of  the  sur- 
plus-value produced  by  them  is  110;  the  total  value  of  all 
commodities  produced  by  them  is  610.  If  we  consider 
the  amount  of  500  as  one  single  capital,  and  capitals  I  to  V 
as  its  component  parts  (about  analogous  to  the  different 
departments  of  a  cotton  mill  which  has  different  propor- 
tions of  constant  and  variable  capital  in  its  carding,  pre- 
paratory spinning,  spinning,  and  weaving  rooms,  on  the 
basis  of  which  the  average  proportion  for  the  whole  factory 
is  calculated),  then  we  should  put  down  the  average  com- 


154  THE  ECONOMICS  OF  SOCIALISM 

position  of  this  capital  of  500  as  390c  +  llOv,  or,  in  per- 
centages, as  78c  +  22v.  In  other  words,  if  we  regard  each 
one  of  the  capitals  of  100  as  one-fifth  of  the  total  capital, 
its  average  composition  would  be  TSc  +  22v;  and  every 
100  would  make  an  average  surplus-value  of  22.  The  aver- 
age rate  of  profit  would,  therefore,  be  22%,  and,  finally, 
the  price  of  every  fifth  of  the  total  product  produced  by 
the  capital  of  500  would  be  122.  The  product  of  each 
100  of  the  advanced  total  capital  would  have  to  be  sold, 
then,  at  122. 

"But,  in  order  not  to  arrive  at  entirely  wrong  conclu- 
sions, it  is  necessary  to  assume  that  not  all  cost-prices  are 
equal  to  100. 

"  With  a  composition  of  80c  +  20v,  and  a  rate  of  sur- 
plus-value of  100,  the  total  value  of  the  commodities  pro- 
duced by  the  first  capital  of  100  would  be  80c  +  20v  + 
20s,  or  120,  provided  that  the  whole  constant  capital  is 
transferred  to  the  product  of  the  year.  Now,  this  may 
happen  under  certain  circumstances  in  some  spheres  of 
production.  But  it  will  hardly  be  the  case  where  the 
proportion  of  c  to  v  is  that  of  four  to  one.  We  must, 
therefore,  remember  in  comparing  the  values  produced  by 
each  100  of  the  different  capitals,  that  they  will  differ 
according  to  the  different  composition  of  c  as  to  fixed  and 
circulating  parts,  and  that  the  fixed  portions  of  different 
capitals  will  wear  out  more  or  less  rapidly,  thus  trans- 
ferring unequal  quantities  of  value  to  the  product  in  equal 
periods  of  time.  But  this  is  immaterial  so  far  as  the  rate 
of  profit  is  concerned.  Whether  the  80c  transfer  the  value 
of  80,  or  50,  or  5,  to  the  annual  product,  whether  the 
annual  product  is  consequently  80c+20v-[-20s=120,  or 
50c4-20v-f  20s=90,  or  5c+20v-f  20s=45,  in  all  of  these 
cases  the  excess  of  the  value  of  the  product  over  its  cost- 


PEOFIT 


155 


price  is  20,  and  in  every  case  these  20  are  calculated  on  a 
capital  of  100  in  ascertaining  the  rate  of  profit.  The  rate 
of  profit  of  capital  I  is,  therefore,  in  every  case  20%.  In 
order  to  make  this  still  plainer,  we  transfer  in  the  following 
table  different  portions  of  the  constant  capital  of  the  same 
five  capitals  to  the  value  of  their  product. 


Value 

Bate  of 

of  Com- 

Surplus 

Surplus 

Rate  of 

Used 

mod- 

Cost 

Capitals 

Vnlue 

Value 

Profit 

UpC. 

ities 

Price 

I. 

80c4-   20v 

100% 

20 

20% 

50 

90 

70 

II. 

70c+   30v 

100% 

30 

30% 

51 

111 

81 

III. 

60c4-  40v 

100%, 

40 

40% 

51 

131 

91 

IV. 

85c+   15v 

100%, 

15 

15% 

40 

70 

55 

V. 

95c+     5v 

100%o 

5 

5% 

10 

20 

15 

390c+110v 

110 

100% 

Total 

78c+  22v 

22 

22% 

Average 

"  Now,  if  we  consider  capitals  I  to  V  once  more  as  one 
single  total  capital,  it  will  be  seen  that  also  in  this  case 
the  composition  of  the  sums  of  these  five  capitals  amounts 
to  500,  being  390c  llOv,  so  that  the  average  composition 
is  once  more  78c  23v.  The  average  surplus-value  also 
remains  22%.  If  we  allot  this  surplus-value  uniformly 
to  capitals  I  to  V,  we  arrive  at  the  following  prices  of  the 
commodities : 


Capitals 

Surplus 
Value 

Value 

Cost  Price 
of  Com-  Price 
mod-    of  Com- 
!     ities    modities 

Rate  of 
Profit 

Deviation 

of  Price 

from 

Value 

I. 

80c+20v 

20 

90 

70 

92 

22% 

+  2 

II. 

70c+30v 

30 

111 

81 

103 

22% 

—  8 

[II. 

60c+40v 

40 

131 

91 

113 

22.% 

—18 

IV. 

85c+15v 

15 

70 

55 

77 

22% 

+  7 

V. 

95c+  5v 

5 

20 

15 

37 

22% 

+17 

"  Summing  up,  we  find  that  the  commodities  are  sold 
at  2+74-17=26  above,  and  8+18^=26  below  their  value, 
so  that  the  deviations  of  prices  from  values  mutually 
balance  one  another  by  the  uniform  distribution  of  the 


156  THE  ECONOMICS  OF  SOCIALISM 

surplus-value,  or  by  the  addition  of  the  average  profit  of 
22  per  100  advanced  capital  to  the  respective  cost-prices  of 
tlie  commodities  of  I  to  V.  One  portion  of  the  commodi- 
ties is  sold  in  the  same  proportion  above  in  which  the  other 
is  sold  below  their  values.  And  it  is  only  their  sale  at 
such  prices  which  makes  it  possible  that  the  rate  of  profit 
for  all  five  capitals  is  uniformly  22%,  without  regard  to 
the  organic  composition  of  these  capitals.  The  prices 
which  arise  by  drawing  the  average  of  the  various  rates  of 
profit  in  the  different  spheres  of  production  and  adding 
this  average  to  the  cost-prices  of  the  different  spheres  of 
production  are  the  prices  of  production.  They  are  condi- 
tioned on  the  existence  of  an  average  rate  of  profit,  and 
this,  again,  rests  on  the  premise  that  the  rates  of  profit  in 
every  sphere  of  production,  considered  by  itself,  have  pre- 
viously been  reduced  to  so  many  average  rates  of  profit. 

s 
These   special  rates   of  profit  are  equal  to  —  in  every 

C 
sphere  of  production,  and  they  must  be  deduced  out  of 
the  values  of  the  commodities.  Without  such  a  deduction 
an  average  rate  of  profit  (and  consequently  a  price  of  pro- 
duction of  commodities)  remains  a  vague  and  senseless 
conception.  The  price  of  production  of  a  commodity,  then, 
is  equal  to  its  cost-price  plus  a  percentage  of  profit  appor- 
tioned according  to  the  average  rate  of  profit,  or  in  otlier 
words,  is  equal  to  its  cost-price  plus  the  average  profit. 

"  Since  the  capitals  invested  in  tlie  various  lines  of  pro- 
duction are  of  a  different  organic  composition,  and  since 
the  different  percentages  of  the  variable  portions  of  these 
total  capitals  set  in  motion  very  different  quantities  of 
labour,  it  follows  that  these  capitals  appropriate  very  dif- 
ferent quantities  of  surplus-labour,  or  produce  very  dif- 


PROFIT  157 

ferent  quantities  of  surplus-value.  Consequently  the  rates 
of  profit  prevailing  in  the  various  lines  of  production  are 
originally  very  different.  These  different  rates  of  profit 
are  equalised  by  means  of  competition  into  a  general  rate 
of  profit,  which  is  the  average  of  all  these  special  rates  of 
profit.  The  profit  allotted  according  to  this  average  rate 
of  profit  to  any  capital,  whatever  may  be  its  organic  com- 
position, is  called  the  average  profit." 

And  throughout,  as  the  advance  of  social  production 
becomes  more  and  more  marked,  by  the  application  in 
industry  of  improved  mechanical  and  chemical  improve- 
ments and  the  consequent  growth  of  constant  relatively  to 
variable  capital  the  tendency  of  the  rate  of  profit,  as 
shown,  is  towards  a  continuous  fall.  This  means  that  the 
social  power  of  production  of  labour  is  itself  steadily  in- 
creasing, though  the  rate  of  profit  may  fall  temporarily 
for  other  reasons.  "  It  is  the  nature  of  capitalist  produc- 
tion and  a  logical  necessity  of  its  development,  to  give  ex- 
pression to  the  average  rate  of  surplus-value  by  a  falling 
rate  of  average  profit.  Since  the  mass  of  employed  living 
labour  is  continually  on  the  decline,  as  compared  to  the 
inass  of  materialised  labour  embodied  ^in  productively 
consumed  means  of  production,  it  follows  that  the  unpaid 
portion  of  living  lal^our  which  creates  surplus-value  must 
fcontinuously  decrease  as  compared  with  the  amount  and 
the  value  of  the  total  capital  invested  and  employed.  And 
inasmuch  that  the  proportion  of  the  entire  mass  of  sur- 
plus-value to  the  value  of  the  total  capital  embarked  consti- 
tutes the  rate  of  profit  this  rate  of  profit  must  perpetually 
fall."  ^ 

It  is  not  necessary  to  follow  Marx's  elaborate  exposition 

1"  Capital,"  Vol.  Ill,  pp.  183-186.  Untermann's  translation 
slightly  modified. 


158         THE  ECONOMICS  OF  SOCIALISM 

any  farther.  But  we  have  here  a  manifest  theoretical 
proof  of  how  it  comes  about  that  the  great  capitals  grow 
constantly  bigger.  They  are  forced  by  competition  to 
embark  larger  and  larger  proportions  of  their  industrial 
capital  in  machinery,  raw  materials,  incidental  materials; 
in  constant  capital,  in  short.  In  every  department  of 
production,  from  soap,  cotton  thread,  oil  refinery,  iron  and 
steel  founding,  food  preparation,  &c.,  &c.,  business  is  con- 
ducted on  a  larger  and  a  larger  scale.  Small  competitors 
are  undersold  and  crushed  out.  Competition,  the  soul  of 
capitalist  production  in  the  earlier  stages,  gradually  ceases 
and  monopolies  in  the  shape  of  Trusts,  Combines,  Cartels 
become  the  dominant  form,  not  only  in  direct  industrial 
production,  but  in  transport,  distribution,  finance,  banking, 
&c.  This  vast  power  based  upon  the  exploitation  of  labour- 
power  can  be  met  and  controlled  only  by  the  organisation  of 
vast  co-operative  associations,  the  direct  interference  of  the 
community,  or  the  uprising  of  the  co-ordinated  and  disci- 
plined forces  of  the  owners  of  labour-power,  the  wage- 
earning  class  itself. 


CHAPTER  VI 


RENT 


It  is  still  not  unusual  for  economists  to  speak  of  rent 
as  if  in  its  present  form,  as  payment  for  the  temporary  use 
of  land,  it  had  lasted  through  the  centuries.  But  this  is 
as  erroneous  as  to  speak  of  exchange  as  always  prevailing 
under  all  forms  of  society.  Eent  has  its  history  as 
exchange  has  its  history;  and  the  competitive  and  ground 
rents  which  are  now  the  rule  in  Great  Britain  are  quite  an 
exceptional  form  of  land  tenure  even  at  the  present  time. 
In  the  primitive  communal  societies  rent,  of  course,  was, 
and  is,  unknown.  Whether  the  land  settled  and  cultivated 
by  the  tribe  or  gens  varied  in  quality,  or  was  all  equally 
good,  made  no  difference  whatever  from  the  point  of  view 
of  the  division  of  tlie  product  among  the  members  of  the 
tribe  or  gens.  The  soil  was  co-operatively  tilled,  and  the 
product  was  communally  divided.  Nor  did  this  exclude,  in 
many  cases,  a  most  elaborate  and  scientific  system  of  culti- 
vation and  irrigation.  In  such  circumstances,  as  there  was 
no  individual  ownership,  so  also  there  was  no  conception 
of  rivalry  for  possession  of  the  more  fruitful  tracts.  At  a 
later  stage,  when  land  was  cultivated  as  personal  or  family 
property  for  a  fixed  term,  and  redistributed  at  the  close  of 
the  term  among  the  tribal  families,  rent  was  still  unknown. 
Throughout  ancient  society,  likewise,  rent,  in  our  English 
sense  of  the  word,  rarely  existed. 

During  the  feudal  period,  the  personal  suit  and  service 
due  to  the  superior  lord  for  lands  held,  when  it  was  changed 

159 


160  THE  ECONOMICS  OF  SOCIALISM 

into  payment  in  kind  out  of  a  proportion  of  the  crop,  or 
even  converted  into  payments  in  money,  was  a  totally  dif- 
ferent thing  from  our  modern  rent.  The  historical  growth 
of  modern  agricultural  rent  in  Great  Britain  is  —  from 
the  rent  paid  in  labour  or  service  by  the  holder  to  the  over- 
lord; to  rent  paid  in  produce  by  the  holder  to  the  land- 
owner; thence  to  the  equivalent  money  rent  paid  to  the 
landlord;  lastly,  to  the  differential  rent,  paid  by  the  capi- 
talist farmer  in  money  to  the  landlord,  for  the  use  of  a 
superior  agent  of  production. 

Eent  in  the  shape  of  the  payment  for  land  by  cottier 
tenants,  where  the  landlord,  being  in  absolute  possession, 
with  needy  and  moneyless  peasants  all  round  him,  is  able 
to  exact  all  the  produce  of  the  soil  for  himself,  less  the  bare 
subsistence  of  the  cottier  tenants  —  this  rent  also  is  totally 
distinct  from  the  rent  which  the  well-to-do  farmer  pays  to 
a  landlord  for  the  lease  of  a  farm.  This  kind  of  cottier 
rent  we  can  still  see  in  the  south  and  west  of  Ireland,  all 
the  "  fair  rent "  enactments  of  the  last  forty  years  to  the 
contrary  notwithstanding. 

Again,  rent  paid  by  small  farmers  with  small  capital,  but 
not  wholly  needy,  who  till  their  own  holdings  themselves, 
with  tlio  aid  of  their  family,  likewise  differs  from  the 
system  we  see  around  us  to-day  in  Great  Britain.  And 
the  landlords  who  obtained  rent  under  this  state  of  things 
soon  found  a  marked  change  for  the  worse,  in  the  amount 
of  rent  they  could  get  in  proportion  to  the  produce  raised, 
when,  owing  to  the  improvements  in  methods  of  cultivation 
and  the  consequent  necessity  for  the  employment  of  a  con- 
siderable capital  in  agriculture,  the  tenants  who  undertook 
to  pay  rent  first  estimated  the  profit  on  their  capital  at  a 
satisfactory  figure,  before  they  would  pay  any  rent  at  all. 


RENT  161 

Interest  on  farmer's  capital  formed  a  deduction  from  the 
total  possible  rent  of  the  landlord. 

This  last  form  of  rent  in  its  fully-developed  shape  —  the 
form  of  rent,  that  is,  paid  in  money  by  the  farmer  who 
owns  capital,  to  the  landlord  who  owns  the  land,  for  the 
privilege  of  tilling  that  land  by  agricultural  labourers  whom 
the  farmer  employs  in  order  to  make  a  profit  out  of  the 
produce  of  their  labour  —  this  is  the  form  of  rent,  so  far 
as  agricultural  land  in  Great  Britain  is  concerned,  which 
we  have  first  to  consider. 

Obviously,  this  arrangement,  by  which  a  capitalist  who 
happens  to  be  a  farmer  takes  land  from  a  person  recognised 
by  society  as  the  owner  of  the  soil,  and  pays  rent  for  it  in 
order  to  make  a  profit  for  himself,  brings  the  whole  cultiva- 
tion of  the  farm  so  hired  within  the  range  of  the  rest  of  the 
system  of  capitalist  production  for  profit.  The  landlord 
in  such  circumstances  has  generally  himself  advanced,  or 
appropriated  from  others,  capital  in  the  shape  of  buildings, 
drainage  works,  &c.,  to  improve  his  land;  and  receives  the 
interest  on  that  capital  so  advanced,  together  with  the  rent 
which  we  may  assume  to  be  paid  for  the  bare  use  of  the 
land  itself.  In  practice  it  is  exceedingly  difficult,  if  not 
impossible,  to  separate  these  two  portions  of  the  rent.  But 
the  fact  that  the  land  when  hired  is  used,  primarily,  for  the 
purpose  of  obtaining  a  profit  for  the  farmer  out  of  the 
produce,  differentiates  this  sort  of  land  cultivation  from 
every  other. 

Thus  the  Irish  cottiers,  the  Indian  ryots,  the  peasant 
farmers  and  metayers  of  the  whole  continent  of  Europe, 
even  most  of  tlie  freehold  farmers  of  North  America  and 
the  Argentina,  till  the  land,  in  the  great  majority  of  cases, 
under  totally  different  conditions  from  those  which  prevail 


162  THE  ECONOMICS  OF  SOCIALISM 

in  England.  If  they  have  good  land,  and  enough  of  it, 
their  circumstances  will  be  good ;  far  superior,  of  course,  to 
those  of  the  same  class  who  till  inferior  soils  or  too  small 
plots  of  good  land.  The  fact  that  the  American  freehold 
farmer  works  his  land  with  probably  the  best  appliances 
obtainable,  and  that  the  ryots  of  India  use  the  primitive 
tools  of  their  ancestors,  makes  no  more  difference  in  regard 
to  their  form  of  economic  production  than  the  land-tax 
imposed  by  the  Government  of  India  turns  the  ryots  into 
competitive  rent-payers,  or  constitutes  them  capitalist! 
farmers.  Both  American  freeholders  and  Indian  ryots  are 
cultivating  the  soil  under  conditions  and  with  objects  that 
are  totally  distinct  from  the  conditions  and  objects  under 
and  for  which  the  English  capitalist  farmers  work  their 
holdings.  Nor  does  the  appearance  of  their  food-stuffs  on 
the  same  market,  even  though  these  food-stuffs  are  indis- 
tinguishable from  one  another,  bring  them  closer  to  the 
English  farmers  in  regard  to  the  conditions  of  production 
existing  in  each  case. 

Having  thus,  to  some  extent,  cleared  the  ground,  we  are 
in  a  position  to  consider  agricultural  rent  as  it  exists  in  our 
present  capitalist  society.  This  is  the  more  important  that, 
everybody  being  acquainted  with  rent  in  some  shape,  all 
are  specially  liable  to  be  led  astray  by  theories  in  connec- 
tion with  this  subject.     Now  what  is  agricultural  rent? 

The  theory  of  rent  which  finds  widest  acceptance  at  the 
present  time,  and  has  even  been  made  the  foundation  of 
other  theories  which  are  put  forward  as  explanations  of  the 
whole  capitalist  system,  is  the  theory  of  Eicardo.  In 
Eicardo's  own  words,  "  rent  is  that  portion  of  the  produce 
of  the  earth  which  is  paid  to  the  landlord  for  the  use  of 
the  original  and  indestructible  powers  of  the  soil."    This 


EENT  163 

manifestly  applies  only  to  agricultural  land.  It  is  what  is 
called  by  many  "  economic  rent "  as  opposed  to  the  popular 
conception  of  rent.  Eent  in  the  popular  sense,  of  course, 
means  the  payment  made  for  the  use  of  any  immovables; 
and  is  sometimes  still  further  extended,  as  when  we  speak 
of  the  rent  of  type  for  printing,  kept  ready  for  use.  In 
the  general  sense  also  rent  covers  the  returns  on  capital 
already  expended  in  improvements  of  the  land  when  it  is 
rented.  Ricardo's  is  a  much  narrower  definition  than 
either  of  these. 

When  Eicardo  spoke  of  "  the  original  and  indestructible 
powers  of  the  soil "  as  the  source  of  the  landlord's  rent,  he 
was  no  doubt  as  well  aware  as  we  are  that  whatever  may  be 
the  original  powers  of  any  soil,  none  of  them,  except  its 
position,  can  properly  be  called  "  indestructible."  How- 
ever fertile  a  soil  may  be,  continued  cropping  will  destroy 
its  fertility,  and  call  for  the  application  of  successive  doses 
of  manure  to  restore  its  exhausted  powers.  It  is  still  a 
moot  question  whether  Eicardo  intended  to  include  locality 
within  the  scope  of  his  original  definition.  Assuming  that 
he  did,  it  is  obvious  that,  from  the  rent-exacting  point  of 
view,  this  "  power,"  also,  is  by  no  means  indestructible ; 
seeing  that  a  shifting  of  population,  or  the  change  of  the 
tidal  flow,  may  entirely  destroy,  or  greatly  deteriorate,  the 
rentability  of  any  plot  of  land  which  owed  its  "  original " 
advantage,  from  the  landlord's  point  of  view,  to  the  neigh- 
bourhood of  a  great  city,  or  its  vicinity  to  a  navigable  river, 
or  to  the  sea. 

It  is  quite  clear,  at  any  rate,  that  it  is  not  the  soil  itself 
but  the  society  living  upon  that  soil  which  is  the  main  cause 
of  Eicardian  as  of  other  rent.  The  social  causes,  as  Mr. 
Posnett  pointed  out,  are  "(1)   Individual  ownership  un- 


164         THE  ECONOMICS  OF  SOCIALISM 

shackled  by  State  interference;  (2)  individual  occupancy 
by  a  farming  class  likewise  unshackled;  and  (3)  the  exist- 
ence of  labourers  perfectly  free  to  compete." 

In  short,  the  social  causes  are  the  individual  and  private 
ownership  of  land,  plus  the  application  to  the  land  of  the 
capitalist  system  of  production,  with  its  private  ownership 
of  tools  and  raw  materials,  and  its  free  labourers  who 
have  no  property  to  sell  except  the  power  to  labour  in 
their  bodies.  The  physical  causes  of  Eicardian  rent  are 
"(1)  The  limited  quantity  of  land;  and  (2)  the  varying 
degrees  of  its  fertility." 

And  Eicardo  himself  explains  how  agricultural  rent 
develops,  and  its  effect  when  developed,  after  the  following 
fashion  :  "  On  the  first  settling  of  a  country  in  which  there 
is  an  abundance  of  rich  and  fertile  land,  a  very  small  pro- 
portion of  which  is  required  to  be  cultivated  for  the  support 
of  the  actual  population  —  or,  indeed,  can  be  cultivated 
with  the  capital  which  the  population  can  command  — ■ 
there  will  be  no  rent.  If  all  the  land  had  the  same  prop- 
erties, if  it  were  unlimited  in  quantity  and  uniform  in 
quality,  no  charge  could  be  made  for  its  use,  unless  where 
it  possessed  peculiar  advantages  of  situation." 

Here  Eicardo  speaks  of  situation  for  the  first  time;  but 
a  purely  social  and  relative  cause  such  as  situation  surely 
belongs  to  a  far  wider  economic  category  than  "  the  orig- 
inal and  indestructible  powers  of  the  soil "  on  which  he 
bases  the  landlord's  claim  to  rent.  "  It  is  only,  then, 
because  land  is  not  unlimited  in  quantity  and  uniform  in 
quality,  and  because,  in  the  progress  of  population,  land 
of  an  inferior  quality,  or  less  advantageously  situated,  is 
called  into  cultivation,  that  rent  is  ever  paid  for  the  use 
of  it.  When,  in  the  progress  of  society,  land  of  the  second 
degree  of  fertility  is  taken  into  cultivation,  rent  commences 


RENT  165 

on  that  of  the  first  quality,  and  the  amount  of  that  rent 
will  depend  on  the  difference  in  the  quality  of  these  two 
portions  of  land."  "  If  good  land  existed  in  a  quantity 
much  more  abundant  than  the  production  of  food  for  an 
increasing  population  required,  or  if  capital  could  be  indef- 
initely employed  without  a  diminished  return,  there  could 
be  no  rise  of  rent;  for  rent  invariably  proceeds  from  the 
emplo}Tnent  of  an  additional  quantity  of  labour  with  a 
proportionately  less  return." 

Again :  "  The  value  of  all  commodities  is  always  regu- 
lated, not  by  the  less  quantity  of  labour  that  will  suffice 
for  their  production  under  circumstances  highly  favour- 
able, but  by  the  greater  quantity  of  labour  bestowed  by 
those  who  continue  to  produce  them  under  the  most  unfav- 
ourable circumstances;  that  is,  the  most  unfavourable 
under  which  the  quantity  of  produce  required  renders  it 
necessary  to  carry  on  the  production."  And  as  a  result  of 
this  — "  It  has  been  justly  observed  that  no  reduction  would 
take  place  in  the  price  of  corn  although  landlords  should 
forego  the  whole  of  their  rent.  Such  a  measure  would  only 
enable  some  farmers  to  live  like  gentlemen,  but  would  not 
diminish  the  quantity  of  labour  necessary  to  raise  raw 
produce  on  the  least  productive  land  in  cultivation." 

Now,  we  have  here  the  statements,  irrespective  altogether 
of  historic  development,  that  rent  is  due  to  the  extension 
of  the  "  margin  of  cultivation  "  to  less  fertile  soils  as  popu- 
lation increases;  that  the  application  of  successive  amounts 
of  capital  and  labour  to  the  same  tract  of  land  always 
results  in  a  less  proportional  quantit}^  of  produce,  a  view 
which  is  known  as  the  theory  of  "  diminishing  returns  "  ; 
and  that,  owing  to  the  law  which  governs  the  exchange  of 
commodities  on  the  market,  the  price  is  not  affected  by  the 
exaction  of  rent  for  the  use  of  a  more  favourable  instru- 


166         THE  ECONOMICS  OF  SOCIALISM 

ment  of  production,  inasmuch  that,  speaking  generally, 
nobody  can  tell  whether  the  product  offered  for  sale  has 
been  grown  on  good  land  or  bad. 

In  these  conditions,  "  Rent  is  always  the  difference  be- 
tween the  produce  obtained  by  the  employment  of  two 
equal  quantities  of  capital  and  labour  "  on  the  same  extent 
of  land,  and  "  Whatever  diminishes  the  inequality  in  the 
produce  obtained  on  the  same  or  on  new  land  tends  to 
lower  rent;  and  whatever  increases  tbat  inequality  neces- 
sarily produces  an  opposite  effect  and  tends  to  raise  it." 

Put  in  a  more  concrete  shape,  the  meaning  is  this: 
Here  are  two  tracts  of  land  each  of  two  hundred  acres  in 
extent.  The  one  tract  returns  just  so  much  corn  as  will, 
at  the  ruling  price  of  grain  on  the  market,  pay  for  the 
labour  employed,  and  the  average  rate  of  interest  and 
average  profit  on  the  capital  embarked ;  let  us  suppose  this 
to  be  20  bushels  of  wheat  to  the  acre.  Here  we  are  at  the 
"margin  of  cultivation,"  other  things  remaining  as  they 
are.     For  such  land  the  landlord  can  demand  no  rent. 

But  there  is  the  other  tract  of  200  acres  which  produces 
28  bushels  of  wheat  to  the  acre,  as  a  return  for  the  applica- 
tion of  an  equal  amount  of  capital  and  labour,  instead  of  20 
bushels.  That  is  to  say,  20  bushels  out  of  the  28  pay  the 
labourers  for  their  labour  at  the  current  rate  of  wages, 
and  repay  the  capitalist  his  advances,  with  current  rate  of 
interest  and  average  profit,  out  of  the  price  which  their  sale 
realises  on  the  market.  There  remain  8  bushels  over. 
The  money  value  of  these  8  bushels,  on  the  average,  the 
landlord  can  ask  for  and  get  as  his  share,  as  the  private 
owner  of  the  land,  for  the  use  of  it  as  an  agent  of  produc- 
tion for  profit. 

Now,  if,  owing  to  increase  of  population  on  the  same 
extent  of  land,  a  third  tract  of  200  acres,  of  less  fertility, 


EENT  167 

is  brought  under  cultivation,  giving  a  smaller  return,  say 
15  bushels  per  acre,  to  the  same  amount  of  capital  and 
labour ;  then  a  rise  of  price  will  be  established,  other  things 
remaining  the  same.  The  margin  of  cultivation  has  been 
extended.  As  a  result,  not  only  will  the  20  bushel  land 
now  be  able  to  pay  a  rent  of  5  bushels  to  the  landlord,  the 
previous  assumption  holding  good,  but  the  28  bushel  land 
will  pay  a  rent  of  13  bushels  to  the  landlord  instead  of  8; 
that  being  the  difference  between  the  15  bushel  land  whicA 
it  will  just  pay  to  cultivate  at  the  new  range  of  prices,  and 
the  land  which,  for  the  same  expenditure  of  capital  and 
labour,  returns  28  bushels. 

In  short,  as  Eicardo  says  elsewhere,  the  price  of  the 
larger  amount  of  grain,  or  other  produce,  returned  by 
superior  land,  goes  to  the  landlord  in  the  form  of  rent, 
instead  of  to  the  producer  or  the  consumer;  after  the 
labourer  has  been  paid  his  wages  and  the  capitalist  has 
received  his  profit  on  his  capital. 

Such,  in  brief,  and  without  taking  account  of  variations 
of  supply  and  the  like,  is  the  Ricardian  theory  of  rent,  in 
the  form  given  to  it  by  Eicardo  himself.  He,  as  is  well 
known,  was  anticipated  by  Anderson  to  some  extent,  and 
owed  the  completeness  of  the  theory,  from  his  point  of  view, 
to  the  work  of  Adam  Smith,  Malthus,  and  West.  Eicardo 
lived  through  the  great  French  wars,  during  which  period 
the  island  of  Great  Britain  furnished  an  apt  illustration  of 
his  theory.  The  importation  of  foreign  grain  was  prac- 
tically excluded;  the  population  was  steadily  increasing; 
the  capitalist  system  of  production  was  in  full  swing  on 
the  land;  the  landlords  were  in  control  of  the  soil  as  private 
owners;  and  the  necessity  for  the  extension  of  the  area  of 
food-production  brought  even  the  worst  lands  into  tillage, 
and  thus  extended  the  margin  of  cultivation.     In  such 


168  THE  ECONOMICS  OF  SOCIALISM 

circumstances  the  price  of  grain  rose  enormously,  owing  to 
the  greater  quantity  of  social  labour  embodied  in  food- 
stuffs, and  the  landlord  class,  as  leases  fell  in,  were  able  to 
demand  constantly-increased  rents  for  the  superior  soils 
they  owned,  as  compared  with  the  inferior  soils  that  neces- 
sity called  into  cultivation. 

At  this  period,  and  under  these  circumstances  —  the 
application  of  machinery  to  agriculture,  scientific  manur- 
ing, and  intensive  cultivation,  with  improvements  in  breed- 
ing and  rearing  live-stock,  being  still  in  their  infancy  — 
Eicardo's  theory  might  well  be  accepted  without  criticism. 
The  price  of  agricultural  commodities  continually  rose 
owing  to  the  rise  in  the  cost  of  production  in  social  labour 
as  determined  by  competition;  the  price  of  manufactured 
commodities  fell  at  the  same  time,  owing  to  the  introduc- 
tion of  machinery  which  reduced  their  cost  of  production 
in  social  labour  as  determined  by  competition. 

But  the  deduction  drawn  by  many  of  his  contemporaries, 
and  even,  incidentary,  by  Eicardo  himself,  that  the  land- 
lord costs  notliing  to  the  community,  seeing  that  his  rent 
did  not  "  enter  into  "  the  price  of  food,  is  not  worth  refuta- 
tion. As  well  might  we  argue  that  the  capitalist  costs 
nothing  to  the  community  because  his  profit  does  not 
"  enter  into "  price,  but  is  squeezed  out  of  the  worker 
before  the  price  is  realised  on  the  market. 

The  law  of  diminishing  returns  to  the  increasing  amount 
of  capital  applied  to  any  given  plot  of  land  which  is  men- 
tioned above  is  also  worthy  of  a  little  further  considera- 
tion. The  meaning  of  it  is  that  the  more  labour  and 
capital  expended  in  cultivating  any  particular  agricul- 
tural area,  though  their  application  may  give  a  greater 
amount  of  produce,  this  additional  quantity  is  less  in  pro- 
portion than  was  the  return  to  the  original  amount  of 


RENT  169 

labour  and  capital  expended  on  the  same  area.  In  other 
words,  if  the  expenditure  of  £10  an  acre  on  a  farm  results 
in  an  output  of  28  bushels  of  wheat  to  the  acre,  then  the 
expenditure  of  a  second  £10  will  not  produce  a  return  of  an 
additional  28  bushels  or  anything  like  it.  That,  speaking 
generally,  is  true  enough. 

But  it  is  likewise  true  that  up  to  a  certain  point  on  all 
land  an  increased  application  of  capital  and  labour  —  which 
of  course  means  in  one  form  or  another  an  increased 
application  of  labour  —  increases  the  total  amount  of  the 
produce  both  actually  and  relatively.  This  is  now  gener- 
ally admitted,  and  by  the  admission  another  hole  is 
knocked  in  the  theory  of  rent  as  formulated  by  Ricardo, 
unless  further  modifications  and  limitations  are  intro- 
duced. Professor  Marshall,  who  cannot  be  accused  of 
being,  as  a  rule,  very  definite  about  anything,  commits 
himself  definitely  on  this  point  of  increasing  and  dimin- 
ishing returns  to  capital  expended  on  cultivation  of  the 
soil;  and  even  tries  to  apply  it  to  the  case  of  the  building 
of  lofty  dwellings  in  great  cities  as  well  as  to  agricultural 
land.  Whether  this  last  is  correct  or  not,  it  is  safe  to 
say  that  it  has  nothing  whatever  to  do  with  the  theory  as 
propounded  by  Ricardo. 

It  will  be  observed,  further,  that  Ricardo  took  no  account 
of  the  historical  growth  of  rent.  Just  as  we  had  the 
aboriginal  hunter  or  fisher  exchanging  his  game  or  his 
catch  on  the  most  approved  principles  of  nineteenth-century 
commerce,  so  we  have  a  society  in  all  its  capitalistic  panoply 
of  landlord,  capitalist  farmer  and  propertyless  labourer 
plopped  down  into  a  new  country,  picking  out  the  most 
fertile  soils  to  begin  with,  allowing  the  landlords  to  appro- 
priate them,  extending  the  cultivation  to  the  poorer  soils 
as  population  increased,  and  so  on,  as  required  to  suit  the. 


170  THE  ECONOMICS  OF  SOCIALISM 

needs  of  the  theorj'.  This  was,  perhaps,  excusable  in  a 
treatise  on  economics  written  ninety  years  ago  by  a  man 
of  genius  whose  very  errors  are  instructive.  But  when  a 
journalistic  joker  turns  farceur  after  the  following  fashion, 
and  is  even  taken  seriously  by  people  with  no  appreciation 
for  humour  of  this  sort,  it  is  time  to  protest:  "  Figure  to 
yourself  the  vast  green  plain  of  a  country  virgin  to  the 
spade,  awaitiug  the  advent  of  man.  Imagine  then  the 
arrival  of  the  first  colonist,  the  original  Adam,  developed  by 
centuries  of  civilisation  into  an  Adam  Smith  prospecting 
for  a  suitable  patch  of  Private  Property.  Adam  is,  as 
Political  Economy  fundamentally  assumes  him  to  be,  'on 
the  make,'  therefore  he  drives  his  spade  into,  and  sets  up 
his  stockade  around  the  most  fertile  and  favourably  situ- 
ated patch  he  can  find."  Then  come  others  who  can't  get 
such  good  land  as  this  original  settler,  who  has  over  them 
an  advantage  of  £500  a  year.  "  Here  is  a  clear  advantage 
of  £500  a  year  to  the  first  comer.  This  £500  is  economic 
rent.  It  matters  not  at  all  that  it  is  merely  a  difference 
of  income,  and  not  an  overt  payment  from  a  tenant  to  a 
landlord.  The  two  men  labour  equally;  and  yet  one  gets 
£500  a  year  through  the  superior  fertility  of  his  land  and 
convenience  of  its  situation.  The  excess  due  to  that  fer- 
tility is  rent !  " 

The  full  force  of  this  argument  will  be  seen  at  once 
from  the  fact  that  America  was,  some  three  hundred  years 
ago,  "  a  country  virgin  to  the  spade."  It  has  since  been 
well  colonised.  Yet  rent  of  agricultural  land,  in  the  form 
of  Eicardian  rent  paid  to  the  landlord,  is  still  almost 
unknown.  Consequently,  we  are  told  that  "  it  matters  not 
at  all "  whether  the  farmer  appropriates  the  whole  product 
of  his  farm  to  himself  or  whether  he  pays  rent  to  a  land- 
lord !     He  pays  rent  to  himself ! ! 


RENT  171 

The  truth  is,  as  we  have,  seen,  that  Eicardian  rent  is 
quite  an  exceptional  form  of  payment  for  the  holding  of 
land.  Eent  of  agricultural  land  in  that  form  depends 
upon,  and  constitutes  a  part  of,  a  fully-developed  capitalist 
society.  It  is  the  same  with  rent  as  with  every  other  eco- 
nomic category:  all  are  dominated  and  determined  by  the 
stage  in  the  capitalist  system  of  production  which  the 
surrounding  society  has  reached. 

Land  to-day  in  Great  Britain  is  regarded  by  the  farmer 
with  capital,  who  rents  it  from  the  landlord,  from  pre- 
cisely the  same  point  of  view  as  a  machine,  for  using  which 
he  pays  a  royalty  to  the  inventor,  is  regarded  by  the  indus- 
trial capitalist.  In  the  one  case  the  capitalist  farmer  pays 
a  more  or  less  heavy  rent  to  the  landlord  for  the  use  of  a 
portion  of  the  soil  of  superior  fertility  to  the  worst  in 
tillage :  in  the  other  case  the  capitalist  manufacturer  pays 
a  rent  to  the  owner  of  the  patent  for  the  use  of  a  mechan- 
ical appliance  of  superior  productive  power  to  the  best 
then  applied.  In  each  case  the  capacity  to  extract  payment 
arises  from  a  social  convention,  which  recognises  the  private 
property  of  the  landlord  in  the  land  and  of  the  patentee,  or 
his  assigns,  in  his  invention.  And,  in  both  cases  alike,  the 
capitalist  regards  the  employment  of  the  land,  or  the 
mechanical  contrivance,  as  a  means  of  making  profit  for 
himself  out  of  the  production  of  saleable  commodities 
created  by  the  labour  of  his  workers. 

Thus  the  capitalist  who  hires  land  in  present  conditions 
does  so  in  order  to  extract  surplus  value  from  his  labourers 
and  therefore  make  a  profit  out  of  it. 

This  same  land  is  regarded  by  the  landlord  as  simply  the 
engine  whereby  he  may  obtain  from  the  capitalist  farmer 
a  money  rent  and  a  money  rent  alone.  Xo  personal  obliga- 
tion goes  with  the  contract  as  a  rule,  and  many  landlords 


17»  THE  ECOXOMICS  OF  SOCIALISM 

have  never  seen  some  of  their-  estates.  It  is  purely  a  pecu- 
niar}'  connection;  for  payment  in  kind,  long  as  it  endured, 
is  now  practically  unknown  in  England. 

Land  rented  by  the  landlord  and  farmed  by  the  capitalist 
farmer  is  looked  upon  by  the  agricultural  labourer,  in  the 
third  place,  much  as  a  factory  is  regarded  by  the  ''  hands  " 
who  work  in  it.  Divorced  from  any  ownership,  or  posses- 
sion, or  interest  in  the  soil,  as  completely  as  any  town 
artisan,  the  land  is  to  him  simply  the  raw  material  on  which 
he  toils  to  get  his  wages.  He  forms  the  third  member  in 
our  agricultural  trinity.  But  not  a  trinity  in  unity  by 
any  means.  It  is  as  compact  a  little  set  of  antagonisms 
as  any  in  our  society.  For  the  agricultural  labourer,  if  he 
has  any  sense  at  all, —  and  what  little  he  had  has  been 
almost  starved  out  of  him  —  regards  both  the  farmer  and 
the  landlord  as  his  natural  enemies;  but  the  farmer  as,  on 
the  whole,  the  worse  of  the  two,  seeing  that,  to  use  Adam 
Smith's  phrase,  he  is  engaged  in  a  "  constant  conspiracy  " 
to  keep  down  or  to  cut  down  wages. 

The  farmer  is,  of  course,  at  war  with  the  agricultural 
labourer  on  this  point  of  wages,  though  it  would  in  many 
cases  have  paid  him  well  to  double  the  rates  of  pay  in  return 
for  the  far  better  work  he  would  get.  He  also  regards  the 
landlord  as  his  natural  enemy,  unless,  indeed,  he  happens 
to  have  got  his  farm  on  lease  below  the  market  value, 
which  on  large  estates  was,  and  even  now  is,  not  unknown : 
the  landlord  deliberately  sacrificing  direct  pecuniary  advan- 
tages in  order  to  retain  the  personal  or  political  loyalty 
of  his  tenants. 

The  landlord  himself  knows  that  his  interests  and  those 
of  the  farmer  are  economically  at  variance,  but  he  is  unable 
to  make  common  cause  with  the  agricultural  labourer 
against  the  farmer;  because  that  would  leave  him  without 


EKNT  173 

tenants,  and  farming  with  a  bailiff  rarely  proves  advan- 
tageous; because,  also,  he  believes  that  high  wages  and 
independence  for  the  labourers  would  in  the  long  run  mean 
low  rents  for  the  landlord  —  perhaps  worse. 

Such  is  the  agricultural  trinit}^  of  antagonistic  "  free- 
doms "  on  which  the  Eicardian  theory  of  rent  is  based :  a 
landlord  free  to  get  as  high  rent  as  he  can ;  a  farmer  free 
to  get  as  much  profit  as  he  can;  a  labourer  free  to  get  as 
much  wages  as  he  can.  All  three  living  in  an  atmosphere 
of  free  sale  of  commodities  in  a  competitive  market. 

Eent,  then,  in  its  modern  sense  of  Eicardian  rent,  is 
due  to : 

(a)  Private  property  in  land; 

(b)  Capitalist  production  for  profit; 

(e)  Unrestricted  competition  among  propertyless 
labourers. 

Now,  however,  comes  Professor  Amasa  "Walker,  who  pro- 
fesses himself  to  be  a  "  Eicardian  of  Eicardians,"  and,  in 
a  book  written  by  him  in  defence  of  the  theory,  tells  us 
that  the  United  States  and  Ireland  are  the  only  two  con- 
siderable countries  in  which  rents  closely  approximating  to 
true  competitive  rents  have  ever  been  habitually  paid! 
"  In  England,  however,"  ho  proceeds,  "  the  very  country  of 
Eicardo,  competitive  rents  have  never  been  exacted." 
This  is  a  strange  sort  of  defence. 

For  in  Ireland,  to  begin  with,  one  of  the  chief  persons  — 
it  is  fair  to  call  him  the  chief  person  —  in  the  Eicardian 
trinity  is  "  conspicuous  by  his  absence."  The  capitalist 
farmer  who  pays  the  landlord  rent  in  return  for  the  use 
of  "  the  original  and  indestructible  powers  of  the  soil "  is 
rarely  to  be  found  in  that  part  of  the  sister  island  to  which 
Professor  Walker  specially  refers.  And  the  land  for  which 
the  cottier  tenants  paid  such  exorbitant  rents,  in  propor- 


174  THE  ECONOMICS  OF  SOCIALISM 

tion  to  its  cultivable  value,  so  far  from  being  originally 
of  superior  fertility,  has,  in  the  majority  of  cases,  only 
been  made  fit  for  tillage  at  all  by  the  interminable  toil  of 
those  same  tenants  and  their  ancestors,  the  result  of  which 
the  landlord  has  grabbed  as  his  own.  In  tbe  United 
States,  on  the  other  hand,  with  which  Professor  Walker 
ought  to  be  very  well  acquainted,  the  great  majority  —  it 
may  be  said  almost  the  whole  —  of  the  farmers  own  their 
farms  in  freehold;  and  it  would  take  a  very  elastic  defini- 
tion of  rent  to  bring  in  the  interest  on  their  mortgages  as 
a  part  of  such  rent. 

Let  us  now  consider  the  Ricardian  theory  from  the  point 
of  view  of  the  recent  history  of  agriculture.  Since  Ricardo 
died,  enormous  changes  have  taken  place;  but  even  at  the 
time  when  he  wrote  his  statements  stood  in  need  of  modi- 
fication. For  example,  the  statement  that  rent  does  not 
enter  into  price,  or  is  not  the  cause  of  price,  simply  means 
that  private  property  in  land  is  not  the  cause  of  agricul- 
tural prices,  or  that  the  prices  of  agricultural  products  do 
not  depend  upon  the  private  ownership  of  land.  But  it 
would  be  easy  to  show  that  private  ownership  in  land  in 
Great  Britain  since  Ricardo's  day  has  restricted  the  output 
of  home  agricultural  products,  which  is  a  direct  economic 
drawback  to  the  whole  community,  and  may  in  conceivable 
circumstances  very  possibly  have  enhanced  price. 

Much  more  important,  however,  than  this  is  the  effect 
of  American,  Indian,  and  Australian  competition  on  the 
price  of  English  agricultural  products.  Population  has 
been  increasing  in  Great  Britain  rapidly  in  the  past  fifty 
years;  yet  so  far  from  there  having  been  an  increase  in 
the  rent  of  agricultural  land,  it  is  notorious  that  the  rents 
of  such  land  in  Great  Britain  fell  from  forty  to 
fifty  per  cent,  within  the  same  period,  and  that  in  some 


EKNT  175 

counties  large  tracts  of  land  have  gone  out  of  cultivation 
altogether.  To  what  is  this  due  ?  In  the  case  of  American 
competition,  undoubtedly,  first,  to  the  enormous  develop- 
ment of  cheap  transport  as  compared  with  the  rates  charged 
by  English  railways,  thus  bringing  the  wheat  centres  of 
America  within  thirty  miles  of  London,  reckoned  by 
freight;  and,  secondly,  to  the  application  of  machinery  to 
the  cultivation  of  the  soil  on  a  large  scale,  thus  reducing 
the  cost  of  production  of  cereals  by  the  same  means  that 
the  cost  of  production  of  manufactured  goods  had  been 
previously  reduced.  With  India,  in  addition  to  the  cheap- 
ness of  freight  for  wheat,  there  was  until  lately  a  mechan- 
ical currency  cause  at  work  tending  to  reduce  prices. 
This  was  due  to  the  fact  that  the  rupee  had  the  same 
purchasing  power  in  India  that  it  had  before  the  great  fall 
in  the  value  of  silver  relatively  to  gold. 

Clearly,  it  is  not  the  superior  fertility  of  the  soil  in 
either  case  which  has  enabled  the  producers  in  the  United 
States  and  in  India  to  undersell  English  farmers  and 
knock  down  English  rents.  Not  at  all.  A  series  of  causes 
connected  with  the  development  of  society  at  the  end  of 
the  nineteenth  century  has  been  at  work,  and  "  the  original 
and  indestructible  powers  of  the  soil,"  aided  by  improved 
processes  of  production  and  an  extraordinary  cheapening 
of  transport  elsewhere  spelt  to  the  English  landlord  con- 
tinuously falling  rents  in  the  face  of  a  continuously-increas- 
ing population. 

Nor  was  this  the  case  in  regard  to  cereals  alone,  though 
the  rent  of  agricultural  land  is  chiefly  dependent  on  their 
price.  Butter,  eggs,  fresh  fruit  and  canned  fruit,  cheese, 
fowls,  even  meat,  fell  rather  than  rose  in  price  in  conse- 
quence of  foreign  imports,  and  the  landlord  suffered 
from  this  cause  as  well.     At  the  present  time  the  popula- 


17i6  THE  ECONOMICS  OF  SOCIALISM 

tion  of  Great  Britain  draws  at  least  five-sixths  of  its  total 
supply  of  wheat  and  half  its  total  supply  of  food  from 
sources  outside  of  this  island.  So  greatly  has  the  area  of 
food  cultivation  on  which  the  population  can  draw  been 
extended,  so  largely  have  the  returns  to  effective  machine 
cultivation  of  the  soil  developed  under  favourable  condi- 
tions, that  the  production  of  food  now  stands  on  much  the 
same  footing  as  the  production  of  manufactured  goods.  It 
was  not  that  the  "  margin  of  cultivation  "  varied  of  itself, 
but  that  the  social  development,  as  manifested  in  the  facil- 
ities for  tillage  and  transport,  had  gone  on  at  so  great  a 
rate  as  to  revolutionise  the  whole  system. 

Whither  does  all  tliis  lead  us?  To  the  truth  that  the 
hire  of  land,  like  the  hire  of  any  other  instrument  of  pro- 
duction for  profit  under  capitalism,  is  governed  by  the 
consideration  of  a  series  of  economic  circumstances  by  no 
means  wholly  covered  by  fertility,  or  even  situation. 
American  agricultural  production,  for  instance,  averages 
but  11  to  15  bushels  of  wheat  to  the  acre.  English  agri- 
culture contrives  still  to  obtain  an  average  of  more  than 
28  to  34  bushels  of  wheat  to  the  acre.  Land  of  by  no 
means  always  first-rate  quality,  therefore,  thousands  of 
miles  distant  from  one  of  the  chief  markets  for  its  prod- 
uce, enabled  its  freehold  farmers  to  hold  their  own  and 
more,  in  competition  with  other  land  producing  a  higher 
average  return  to  the  acre  close  to  that  same  market. 

Hence  it  might  well  happen  that  it  would  be  better  for 
a  farmer  who  understood  his  business  to  pay  a  considerable 
rent  for  a  farm  in  the  valley  of  the  Mississippi,  in  Dakota, 
or  on  the  Sacramento  plain,  in  order  to  make  a  profit 
by  shipping  grain  to  London,  rather  than  that  he  should 
occupy  a  farm  at  a  low  rent,  or  at  no  rent  at  all,  in  Devon- 
shire or  Suffolk.     This,  too,  although  the  latter  soil  might 


EENT  177 

even  be  the  more  fertile,  as  well  as  possess  the  advantage 
in  point  of  actual  situation.  But  this  will  only  fit  in  with 
the  Eicardian  theory  on  the  supposition  that  we  to  a  great 
extent  neglect  natural  fertility,  which  is  the  keystone  of 
that  theory,  and  introduce  a  number  of  other  considera- 
tions which  are  entirely  omitted  in  Eicardo's  exposition  of 
the  causes  of  agricultural  rent. 

Nevertheless,  if  we  assume  that  all  agricultural  land  has 
the  same  advantage  in  the  matter  of  transport  and  is  tilled 
with  equal  skill,  knowledge,  and  command  of  machinery, 
then  the  land  which  is  most  fertile  will,  provided  the  situ- 
ation in  reference  to  market  is  equally  good,  command  a 
competitive  rent  under  capitalism  proportionally  in  excess 
of  that  which  will  be  paid  for  less  fertile  soils;  and 
Eicardo's  theory  of  agricultural  rent  depending  on  margin 
of  cultivation  is  to  that  extent  true.  But  even  so,  in  old 
settled  countries,  that  same  fertility  is  quite  as  much  due 
to  the  expenditure  of  capital  and  labour  on  the  land  in  the 
past,  as  it  is  to  those  "  original  and  indestructible  qualities 
of  the  soil "  which  Eicardo  postulated. 

Agricultural  rent,  however,  by  no  means  exhausts  the 
categories  of  competitive  rent  under  capitalism.  Dead- 
rents  and  royalties  paid  for  mines  are,  in  like  manner, 
governed  by  the  same  rule  that  applies  to  the  differential 
rent  of  land.  For  instance,  it  may  be  just  worth  the  while 
of  the  owner  of  mineral  land,  coal,  iron  or  lead,  to  work  it 
himself  with  his  own  capital,  or  to  let  portions  of  it  to 
working  miners  to  work  on  tribute,  he  receiving  an  agreed 
part  of  the  minerals  raised.  But  the  same  mines,  not  being 
rich,  or  the  seams  or  veins  not  easily  accessible,  would  not 
offer  sufficient  inducement  in  the  way  of  profit  for  a  capi- 
talist to  undertake  to  develop  the  property;  paying  to  the 
owner  a  royalty  of  fourpence  or  sixpence  a  ton,  or  five  per 


178  THE  ECONOMICS  OF  SOCIALISM 

cent,  on  the  gross  return.  Here,  therefore,  is  no  dead- 
rent  or  royalty.  This  is  the  margin  of  exploitation  for 
the  time  being. 

All  mineral  lands  of  superior  quality  equally  well  placed 
with  these  will  then  command  a  royalty  in  proportion  to 
their  greater  richness,  or  the  less  difficulty  and  lower  cost 
of  extraction.  Similarly,  water-power,  fisheries,  and  so  on, 
command  a  differential  rent,  according  to  their  relative 
superiority  as  agents  of  production.  In  every  case  similar 
products  fetch  the  same  price  on  the  market,  that  price 
being  regulated  by  social  cost  of  production  determined  by 
competition. 

Rent  in  such  cases  arises,  as  in  the  case  of  agricultural 
land,  by  the  demand  of  the  private  owner  for  a  share  of 
the  produce  in  return  for  the  temporary  cession  to  the 
capitalist  of  his  recognised  legal  right  to  do  what  he  likes 
with  what  society  pleases  to  allow  him  to  call  his  own. 
Here,  too,  manifestly,  rent  arises  from  a  monopoly  of  a 
portion  of  the  earth's  surface  accorded  by  society  to  an  indi- 
vidual. The  amount  of  that  rent,  under  the  capitalist 
system  of  production,  is  determined  by  the  relative  supe- 
riority of  that  portion  of  the  earth  which  he  owns  to 
another  portion  which  it  only  just  pays  at  the  then  existing 
price  of  the  product  to  develop. 

We  now  come  to  ground-rent,  the  rent  of  land  in  cities. 
In  this  case  we  find  ourselves  at  once  quite  outside  "  the 
original  and  indestructible  powers  of  the  soil."  Even 
situation  becomes  a  purely  social  matter.  Here,  if  any- 
where, it  is  clear  to  everybody  that  "  rent  arises  from 
society  and  not  from  the  soil."  Some  of  the  greatest  cities 
in  the  world  have  grown  up,  not  where  it  would  seem  most 
convenient  to  locate  them,  but  in  situations  quite  the  reverse 
of  advantageous.     Paris  itself  being  a  marked  instance  of 


EENT  179 

this.  Yet,  when  a  considerable  population  has  established 
itself  at  any  centre,  or  trade,  administration  and  general 
use  have  accustomed  the  nation  or  the  world  at  large  to 
visit  and  deal  at  this  or  that  city,  it  takes  a  long  period  to 
bring  about  any  great  change. 

Indeed,  nothing  short  of  such  a  complete  diversion  of 
traffic  as  that  which  took  place  after  the  conquest  of  Con- 
stantinople and  the  interruption  of  the  old  trade  routes  to 
the  East  seems  capable  of  shaking  the  supremacy  of  a  great 
historical  city,  whether  its  situation  is  naturally  favour- 
able like  that  of  Genoa,  or  more  or  less  accidental,  as  in 
the  case  of  Venice  or  Amsterdam.  On  the  other  hand,  we 
can  see  plainly  that  mere  superiority  of  situation  does  not 
necessarily  carry  with  it  a  great  population. 

No  more  remarkable  instance  of  this  exists  than  the  con- 
trast between  Melbourne  and  Geelong.  The  latter  city, 
lying  about  thirty  miles  from  Melbourne,  has  a  fine  harbour, 
is  closer  to  the  great  mineral  and  agricultural  resources  of 
the  Colony  of  Victoria,  and,  as  the  centre  of  a  large  popu- 
lation, would  be  easy  to  drain.  Melbourne  has  no  better 
port  than  an  open  roadstead,  is  more  remote  from  the 
provincial  districts  of  greatest  wealth,  is  very  badly  situ- 
ated for  drainage,  being  on  a  level  for  the  most  part  with 
the  sluggish  Yarra  Yarra,  and  possesses  no  advantages  in 
the  surrounding  countrv'  to  compensate  for  these  draw- 
backs. Xevertheless,  Melbourne  has  a  population  of 
700,000  against  the  30,000  of  Geelong;  the  ground-rents, 
or  the  purchase  price  of  sites,  in  Collins  Street  and  Bourke 
Street  are  as  high  as  those  in  the  City  of  London;  while 
the  rents  in  the  smaller  city  are,  of  course,  comparatively 
trifling. 

Similar,  though  not  such  striking,  examples  of  higher 
ground-rents  being  obtained  for  what  appear  to  be  origi- 


180  THE  ECONOMICS  OP  SOCIALISM 

nally  and  actually,  from  the  point  of  view  of  convenience, 
less  favourable  sites  are  common.  Moreover,  the  tendency 
of  great  cities,  when  once  established,  is,  under  existing 
conditions,  to  grow  continuously  bigger  and  bigger.  The 
set  of  population  is  steadily  from  the  country  to  the  towns. 
Nor  is  this  the  case  only  in  old-settled  countries.  Even  in 
America  and  the  Colonies  the  same  tendency  can  be  traced. 

As  a  result  of  this  social  movement,  hundreds  of  thou- 
sands, and  even  millions  of  people  are  now  concentrated 
within  comparatively  narrow  limits;  thus  huddled  together, 
not,  as  in  the  Middle  Ages,  for  the  sake  of  the  protection 
which  the  fortifications  and  common  defence  of  the  armed 
citizens  gave  them  against  the  nobles  and  brigands  without, 
but  by  a  series  of  economic  causes  which  dominate  them, 
instead  of  being  dominated  by  them. 

Consequently,  competition  for  the  favoured  spots  within 
these  narrow  limits  becomes,  from  social  causes,  very  keen, 
and  the  gain  of  the  owners  of  the  land  on  which  the  cities 
are  built  is  proportionately  great.  Thus  the  actual  ground- 
rents  of  London  —  the  amount  of  money  paid  by  us 
Londoners  for  the  privilege  of  occupying  the  site  of  our 
own  city,  to  a  handful  of  persons  whom  we  choose  to  con- 
sider as  entitled  to  exact  it  from  us  —  reach  the  total  of 
more  than  £20,000,000  a  year,  and  they  are  increasing  at 
the  rate  of  £200,000  yearly.  All  this  goes  into  the  pockets 
of  the  owners  of  the  land,  not  assuredly  from  any  inherent 
virtue  in  the  soil  itself,  still  less  in  the  landlords  them- 
selves ;  but  from  the  social  development  which  is  going  on 
in  every  direction,  and  which  is  legally  compelled  by  these 
gentlemen  to  "  stand  and  deliver "  every  three,  six,  or 
twelve  months  a  fine  full  ransom  in  the  shape  of  rent. 

The  increase  of  rental  value,  due  solely  to  the  social 
action  of  the  inhabitants  of  great  cities,  is  denounced  by 


KENT  181 

some  as  "unearned  increment,"  and  under  that  name  it 
has  been  a  favourite  topic  for  land  reformers  and  munic- 
ipal reformers,  who  are  often  stone-blind  to  other  forms 
of  monopoly  with  their  unearned  incomes.  Yet  this  un- 
earned increment  of  rent,  due  to  social  causes  and  realised 
by  social  convention,  constitutes  only  a  portion  of  the 
entire  unearned  surplus-value  wliich  private  ownership  of 
the  means  and  instruments  of  production  enables  the  active 
capitalist  class  to  extract  from  the  unpaid  labour  of  the 
wage-earners  and  then  divide  with  others. 

City  ground-rents  themselves  are  divided  into  several 
categories.  First,  there  are  the  ground-rents  which  arise 
directly  from  the  industrial  surroundings  and  constitute  a 
deduction,  for  the  benefit  of  the  landlord,  from  the  surplus- 
value  of  the  manufacturer,  or  the  profits  of  the  distributor. 
Under  this  heading  come  the  ground-rents  of  factories  and 
workshops  as  well  as  the  ground-rents  of  wharves  and 
shops.  These  rents  are  high  or  low  according  as  the  plot 
of  land  for  which  rent  is  demanded  is  situated  favourably 
or  otherwise  for  production  or  trade.  They  are  paid  by  the 
occupiers  as  a  portion  of  the  cost  of  the  instruments 
necessary  to  them  for  the  making,  or  the  realising,  of  a 
profit. 

Then  there  are  the  luxury  ground-rents,  as  we  may  call 
them.  These  are  the  ground-rents  paid  to  the  landlords, 
not  for  the  purpose  of  obtaining  any  advantage  in  indus- 
trial business  by  the  use  of  the  plot  of  land  paid  for,  but 
for  the  enjoyment  of  the  advantages,  social,  sanitary,  or 
other,  connected  with  a  particular  site.  Such  rents  are 
paid  by  the  wealthy  out  of  the  surplus  value  already  taken 
and  paid  over  to  them  from  the  unpaid  labour  of  the  work- 
ers. Here,  as  elsewhere,  competition  determines  the 
amount  of  the  actual  rent  to  be  paid.     Landlords,  how- 


182  THE  ECONOMICS  OF  SOCIALISM 

ever,  commonly  exact  less  than  the  full  rent  they  might 
get  for  sites  of  this  sort,  in  return  for  capital  expended 
by  the  leaseholders  in  improvements,  building,  and  so  on. 
But  the  landlords  themselves  generally  obtain  enhanced 
rents  from  public  improvements  to  which  they  contribute 
nothing  at  all,  as  well  as  from  the  increasing  pressure  of 
population. 

Here,  of  course,  fashion,  which  is  a  purely  social  force, 
has  a  great  deal  to  do  with  the  amount  of  the  rents  which 
are  demanded  and  paid ;  and  as  fashion  changes  within  the 
limits  of  a  city,  with  little  reference  to  the  character  of  the 
soil,  so  rents  rise  and  fall.  Districts  which  once  com- 
manded very  high  ground-rents  on  becoming  unfashionable 
are  estimated  at  a  lower  level  of  rent;  while  districts,  for- 
merly unoccupied  or  covered  by  a  low  class  of  dwellings, 
become  fashionable  and  return  extremely  high  ground- 
rents  to  their  owners. 

A  third  class  of  ground-rents  are  those  which  are  paid 
for  the  sites  of  working-class  dwellings.  These  are  fre- 
quently much  higher  than  either  the  situation  or  the  char- 
acter of  the  houses  erected  on  the  sites  would  seem  to 
warrant.  Competition  for  lodgings  which  are  not  far  from 
their  work  compels  labourers  to  pay  high  rents  for  the 
worst  possible  accommodation,  a  drawback  so  far  only  par- 
tially removed  by  improved  transport.  These  ground- 
rents,  and  the  rack-rents  of  the  dwellings  from  which  they 
are  deducted,  constitute  in  reality  the  exaction  of  a  direct 
tribute  from  the  wage-earning  class,  in  addition  to  the  sur- 
plus value  indirectly  squeezed  out  of  them,  in  the  form  of 
unpaid  labour  embodied  in  commodities. 

The  rents  of  land  converted  into  a  money  payment  on  a 
competitive  basis  thus  become  a  secure  income  to  the 
owner  of  the  land  rented,  and  they  have  become  in  the 


EENT  183 

main  so  secure,  especially  in  respect  to  the  ground-Tents 
of  great  cities  and  market-garden  land  adjacent  to  them, 
that  their  value  is  estimated  at  many  years'  purchase; 
twenty  to  twenty-five  years'  purchase  being  frequently 
given  for  such  rents.  Agricultural  land,  also,  is  not  un- 
frequently  bought  to  return  in  rents,  after  all  outgoings, 
no  more  than  three  per  cent,  upon  the  capital  sum  paid. 
When  this  is  done,  the  facts  are  turned  round  the  other 
way,  and  it  is  argued  that  owners  of  land  are  obtaining 
such  a  low  interest  upon  their  invested  capital  that  they 
are  really  benefactors  to  society  by  accepting  it.  The  truth 
being  that  it  is  the  very  certainty  of  being  able  to  obtain 
the  fruits  of  other  people's  labour,  under  legislative  enact- 
ment and  social  convention,  which  gives  so  large  a  capital 
value  to  the  rental  paid. 

Again,  both  in  the  case  of  agricultural  land  and  urban 
land,  the  landowner  obtains,  in  addition  to  his  rent,  the  ad- 
vantage of  such  improvements  as  have  been  made  by  the 
tenant.  Even  compensation  for  unexhausted  improve- 
ments does  not  wholly  save  the  really  capable  and  thrifty 
farmer  from  contributing  of  his  capital  and  the  labour  of 
his  agricultural  labourers  to  increase  the  value  of  the  mo- 
nopoly which  the  private  ownership  of  land  confers  upon 
the  landlords  in  a  thickly-peopled  country.  In  cities  this 
is  even  more  apparent.  Apart  from  the  unearned  incre- 
ment of  rent,  as  it  is  the  fashion  to  call  it,  due  to  the 
higher  competitive  value  of  land  in  crowded  industrial  cen- 
tres as  the  population  increases,  the  landowners  have  an- 
other great  advantage,  which  they  use  to  the  utmost  as 
against  the  population,  at  any  rate  in  Great  Britain.  They 
refuse  to  part  with  the  freehold  of  their  land,  and  will  let 
it  only  on  building  leases,  which  tend  to  get  shorter  and 
shorter. 


184  THE  ECONOMICS  OF  SOCIALISM 

Thus  the  system  of  private  landownership,  in  a  country 
where  capitalist  production  is  fully  developed,  involves  bad 
tillage  in  agriculture  and  bad  buildings  in  towns.  The 
farmer  who  takes  the  long  lease  of  a  farm,  having  no  real 
security  of  tenure,  is  careful  not  to  leave  the  land  which 
he  has  rented  in  any  better  heart  at  the  end  of  his  lease 
than  it  was  at  the  beginning.  It  is,  therefore,  not  uncom- 
mon to  see  land,  taken  on  lease  for  a  term  of  years,  admi- 
rably farmed  for  about  half  or  two-thirds  of  the  period,  and 
then  gradually  let  down  again  to  its  original  level,  so  that 
the  landlord  may  not  receive  a  portion  of  the  farmer's  own 
capital,  in  addition  to  his  rent,  as  a  gratuity  on  leaving. 

How  prejudicial  this  is  to  the  interests  of  the  community 
it  is  unnecessary  to  enlarge  upon ;  nor  how  harmful,  even  to 
the  labourers,  who,  in  addition  to  having  to  provide  the 
landlord  with  his  rent  and  the  farmer  with  the  interest  on 
his  capital  and  his  profit,  in  return  for  subsistence  wages, 
are  liable  to  be  taken  on  and  thrown  off,  as  it  suits  the 
farmer  to  work  his  farm  on  the  higher  or  the  lower  scale. 
All  this,  over  and  above  the  growing  uncertainty  of  the  la- 
bourers' position,  owing  to  the  introduction  of  labour-sav- 
ing machinery  on  the  land  and  the  substitution  of  pastoral 
for  arable  farming. 

In  the  towns  the  same  anti -social  rule  governs  building 
operations  under  similar  conditions.  Building  leases,  for 
60  to  99  years,  granted  in  the  majority  of  cases  to  builders 
whose  sole  object  it  is  to  obtain  a  profit  by  enhanced 
ground-rents,  or  by  the  sale  of  the  carcasses  of  the  houses 
which  they  run  up  —  such  leases  as  these  constitute  a  direct 
premium  on  jerry-building.  At  the  end  of  the  lease  the 
houses  built  upon  the  land  fall  in  to  the  ground  landlord, 
and  it  is  to  his  interest  that  they  should  be  well-built.  But 
he  cannot  push  his  restrictions  too  far  in  this  direction,  or 


EEXT  185 

he  would  fail  to  get  capitalists  to  come  in  and  build  upon 
his  land. 

Construction  for  profit,  on  the  chance  of  meeting  a  grow- 
ing demand  at  a  large  increase  of  rent,  consequently  entails 
scamping  in  building,  as  production  for  profit  entails  adul- 
teration in  trade.  And  where  this  system  of  speculative 
building  on  leasehold  land  is  pushed  to  its  extreme  limit, 
as  in  London,  the  class  of  dweJings  and  warehouses  pro- 
vided are  nothing  short  of  disgraceful.  The  drawbacks  to 
the  community,  from  every  point  of  view,  are  so  great  that 
gradually  public  authority  is  beginning  to  restrict  the 
licence  of  the  landlord  and  the  capitalist  in  this  direction; 
but  no  permanent  change  for  the  better  can  be  brought 
about  so  long  as  private  ownership  of  land  continues. 

It  seems,  therefore,  that  a  wider  definition  of  the  rent 
of  land  under  capitalism  is  needed  than  that  given  by 
Eicardo,  and  the  following  is  suggested: 

Rent  of  land  is  that  portion  of  the  total  net  revenue 
which  is  paid  to  the  landlord  for  the  use  of  plots  of  land 
after  the  average  profit  on  the  capital  emharJced  in  develop- 
ing such  land  has  been  deducted. 

This  definition  covers  not  only  the  rent  paid  for  agri- 
cultural land,  but  also  the  dead-rent  and  royalties  paid 
for  the  right  to  extract  minerals  and  the  ground-rents  paid 
in  the  cities.  It  likewise  places  rent  in  its  proper  position 
in  the  economic  and  social  arrangements  of  to-day. 

Contrary  to  appearances,  the  capitalist,  even  in  the  mat- 
ter of  such  a  primary  agent  of  production  and  habitation 
as  the  land,  is  enabled  to  secure  his  own  terms  as  against 
the  landlord  for  the  employment  of  his  capital,  when  land 
is  brought  under  cultivation,  when  mines  are  developed, 
and  when  town  sites  ?re  built  upon.  When  leases  fall  in 
and  the  landlord  becomes  owner  of  tenants'  improvements 


186  THE  ECONOMICS  OF  SOCIALISM 

as  well  as  of  the  land,  or  when  the  landlord  tills,  or  builds 
upon,  his  own  land,  or  mines  for  his  own  profit,  then  rent 
and  profit  or  interest  on  capital  are  necessarily  merged  in 
one  rack-rent  return. 

From  what  has  been  said,  it  is  easy  to  draw  the  conclu- 
sion that  confiscation  of  "  economic  rent,"  supposing  it  to 
be  possible  to  arrive  at  what  economic  rent  really  amounts 
to  in  any  country,  or  the  confiscation  of  all  rent  of  land  of 
every  sort,  would  not  affect  the  position  of  the  working  por- 
tion of  the  community,  unless  the  money  so  obtained  were 
devoted  to  giving  them  more  amusement,  to  providing  them 
with  better  surroundings,  and  the  Like.  Competition  for 
employment  under  capitalist  control  would  go  on  as  before. 
Workers'  wages  would  undergo  no  increase  whatever,  nor 
would  their  social  status  be  in  any  way  improved.  The 
capitalist,  however,  would  be  more  dominant  than  ever,  and 
the  competition  for  subsistence  wages  would  continue 
among  the  propertyless  wage-earners. 

In  fact,  the  attack  upon  competition  rents  is  merely  a 
capitalist  attack.  That  class  sees  a  considerable  income 
going  off  to  a  set  of  people  who  take  no  direct  part  in  the 
exploitation  of  labour;  and  its  representatives  are  naturally 
anxious  to  stop  this  leakage,  as  they  consider  it,  and  to  re- 
duce their  own  taxation  for  public  purposes  by  appropriat- 
ing rent  to  the  service  of  the  State.  That  is  all  very  well 
for  them. 

But  to  the  workers  it  makes  no  difference  whatever  how 
the  surplus-value  obtained  by  the  incorporation  of  their 
unpaid  labour  in  commodities  is  divided  up.  Wliether  the 
landlords  take  one-fiftli  and  the  capitalists  four-fifths,  or 
the  capitalists  absorb  the  whole  five-fifths,  concerns  the  toil- 
ers not  at  all.  They  would  not  get  a  farthing  of  the  money 
in  any  case:  no  matter  how  the  burdens  were  shifted,  the 


EENT  187 

men  and  women  at  the  bottom  would  still  have  to  bear  the 
whole  weight. 

This  is  why  proposals  for  a  single  tax  upon  'land  values'* 
have  always  been  ridiculed  by  economists  who  know  their 
business,  as  failing  to  offer  any  solution  of  the  land  ques- 
tion, or  of  any  other  of  the  pressing  social  problems  of  the 
day.  The  only  result  of  the  confiscation  of  competitive 
rents  or  royalties  by  tbe  State,  and  the  application  of  the 
revenue  thence  derived  to  the  reduction  of  taxation,  would, 
as  before  remarked,  be  the  strengthening  of  the  hands  of 
the  capitalist  class.  For  State  ownership  of  rent  by  itself 
does  not  check  in  the  least  degree  the  operations  of  capital, 
nor  does  it  involve  in  any  sense  the  establishment  of  co- 
operative production  on  the  land. 

So  determinedly  do  some,  however,  stick  to  this  rent 
theory  that  they  even  contend  that,  under  a  Socialist  or- 
ganisation of  society,  when  co-operation  had  been  substi- 
tuted for  competition  in  every  department  of  production 
and  distribution,  rent  of  land  would  still  exist.  But  the 
rent  of  superior  soils,  or  of  superior  sites,  arises  from  pri- 
vate property  in  those  soils  or  sites,  and  is  based  upon  di- 
vision of  labour  and  antagonistic  classes. 

When  private  property  in  land  ceases,  therefore,  when 
human  beings  cease  to  strive  against  one  another,  and  an- 
tagonistic classes  cease  to  be,  rent  will  cease  too.  Eent,  in 
short,  will  no  more  exist  under  the  Communism  of  the  fu- 
ture than  it  existed  under  the  Communism  of  the  past; 
and  the  very  idea  of  rent  being  exacted  under  Socialism, 
in  order  to  stop  a  fight  for  a  dwelling  on  Richmond  Hill, 
will  be  regarded  by  coming  generations,  if  they  ever  hear 
of  that  absurd  figment  of  the  imagination,  as  conclusive 
evidence  of  the  narrow-minded  prejudice  of  the  educated 
middle-class  in  the  twentieth  century. 


188  THE  ECONOMICS  OF  SOCIALISM 

Eent  is  due  to  historic  development  and  social  conven- 
tion. By  this  social  convention  private  ownership  of  land 
is  recognised  by  the  community  and  upheld  by  law;  thus 
entitling  landlords,  like  their  friends  and  enemies  the  cap- 
italists, to  obtain  a  large  share  of  the  industrial  product 
without  doing  any  productive  work. 


CHAPTER  VII 

INTEREST 

Interest  on  money  has  a  long  history,  anterior  even  to 
rent.  Interest  on  capital  in  its  money  form  is,  indeed, 
much  older  than  rent,  and  of  course  very  much  older  than 
profit  in  its  modern  shape.  It  arose  out  of  the  money 
capital  of  the  merchants  or  traders  of  antiquity  which  es- 
tablished itself  in  their  hands  as  a  sort  of  social  syphon, 
specially  adapted  to  suck  wealth  out  of  both  sides,  in  the 
exchange  and  commercial  operations  carried  on  by  them, 
as  indispensable  go-betweens  to  the  small  producers  of  those 
times. 

Standing  between  the  buyers  and  the  sellers  of  antiquity, 
the  owners  of  money,  who  possessed  the  universal  equiva- 
lent, traded  between  the  two;  and  had  the  opportunity,  of 
which  they  took  the  fullest  advantage,  of  getting  the  better 
of  both.  Hence  the  money  capital  of  this  merchant  class 
steadily  increased  by  taking  toll  of  the  produce  which 
passed  through  their  hands. 

The  money  power  thus  obtained  was  extended,  by  proc- 
ess of  accumulation  and  hoarding.  By  degrees,  these  op- 
ulent traders  found  themselves  in  possession  of  sufficient 
means  to  continue  this  commercial  business  on  the  increas- 
ing scale  which  the  growth  of  trade  demanded ;  and  at  the 
same  time  they  were  able  to  lend  a  portion  of  their  money 
at  interest  to  those  who  needed  and  could  pay  for  it. 
Money-owning  here  appears  historically  in  opposition  to, 
and  in  antagonism  with,  landowning. 

189 


190  THE  ECONOMICS  OF  SOCIALISM 

The  economic  influence  of  usury  on  ancient  society  was 
very  great.  It  acted  from  the  first  as  a  revolutionary  and 
disruptive  force.  Not  only  did  usury  help  to  uproot  and 
destroy  the  small  free  producers,  but  it  performed  a  similar 
service,  though  not  so  completely,  for  the  great  slave- 
M'orked  estates,  and  converted  patriarchal  or  family  slavery, 
under  which  the  slaves  had  some  chance  of  being  fairly 
treated,  into  mere  chattel  slavery,  under  which  the  slaves 
were  regarded  as  more  or  less  intelligent  human  machines, 
provided  for  the  supply  of  wealth  to  their  masters. 

Usurers  who  advanced  on  estates,  large  or  small,  be- 
came, by  the  pressure  they  were  able  to  exert,  and  the 
wholly  anti-social  relations  they  were  able  to  establish,  mas- 
ters of  the  economic  forces  of  the  time;  and  may  be  said 
to  have  filled,  alike  in  regard  to  freemen  and  slaves,  di- 
rectly and  indirectly,  the  position  of  the  successful  sweat- 
ers of  modern  days.  And  they  were  regarded,  both  then 
and  in  the  feudal  period. which  followed, —  in  which,  by 
the  way,  they  played  much  the  same  economic  role  —  as  an 
altogether  hateful  class. 

For  many  centuries  the  exaction  of  interest  for  money 
lent  was  universally  denounced  as  usury,  and  was  fre- 
quently punished  by  the  law.  To  lend  money  in  order  to 
beget  more  money  was  regarded  as  an  unnatural  means  of 
engendering  an  unnatural  offspring.  Aristotle  speaks  of 
this  method  of  acquiring  riches  as  most  reprehensible. 
Usury,  according  to  him,  means  money  born  of  money ;  "  so 
that  of  all  means  of  money-making  this  is  the  most  con- 
trary to  nature."  The  philosophers  and  jurists  of  the 
Eoman  period  took  the  same  view. 

The  Fathers  of  the  Church  followed  on  the  same  side, 
and  passage  after  passage  might  be  quoted  from  their 
writings,  invoking  all  the  wrath  of  heaven  and  all  the  tor- 


INTEREST  191 

ments  of  hell  against  the  greedy,  rapacious,  usurers  who 
were  wicked  enough  to  exact  interest  for  what  is  nowa- 
days called  "pecuniary  accommodation." 

But  the  development  of  the  economics  of  class  society 
took  no  more  account  of  the  furious  invectives  of  the  men 
of  God  than  it  did  of  the  milder  censures  of  the  pagan 
philosophers,  or  of  the  punishments  inflicted  upon  indi- 
vidual usurers  by  the  pagan  law-givers.  Economics  pay 
no  respect  to  the  law  or  the  prophets.  Money-lenders  be- 
came continually  more  numerous  and  more  powerful,  not- 
withstanding the  intervention  now  and  again  by  the  State 
on  behalf  of  the  debtors ;  and  the  only  effect  of  the  ban  put 
upon  usurers  then  and  later  Avas  to  raise  the  rate  of  interest 
demanded  on  money  lent;  by  way  of  compensation  for  the 
greater  risk  run  by  the  lender  of  losing  not  only  his  ad- 
vance itself,  by  way  of  forfeiture,  but  certain,  to  him,  very 
valuable  portions  of  his  person  into  the  bargain. 

Money,  of  course,  was  lent  under  these  circumstances  in 
its  corporeal  shape  as  money,  as  the  universal  metallic 
equivalent.  With  money  the  borrower  could  buy  anything. 
Interest  was  exacted,  under  such  circumstances,  not  as  a 
share  of  the  profit  to  be  realised  by  the  borrower,  nor  as  a 
reward  of  abstinence  in  the  lender  for  not  having  spent  the 
money  at  Corinth  or  Pompeii  before  he  lent  it ;  but  simply 
because  the  social  necessities  of  the  borrower  rendered  it 
imperative,  or  highly  desirable,  that  he  should  have  the 
temporary  use  of  the  money,  and  the  lender  was  able  to 
calculate  upon  this. 

There  was  no  question  here  of  industrious,  thrifty  Char- 
icles  lending  his  plane,  or  his  plough,  to  the  less  industri- 
ous, less  thrifty,  or  more  unlucky  Gallus,  so  that  Gallus 
might  smooth  more  planks  or  raise  a  larger  crop  of  wheat ; 
and  that  then  Charicles  should  participate  in  the  gain  due 


192  THE  ECONOMICS  OF  SOCIALISM 

to  the  superior  appliance  which  in  the  way  of  business  he 
had  lent  to  Gallus.  This  pretty  fairy-tale,  which  the  late 
M.  Bastiat,  Mr.  Henry  George,  and  others  have  amused 
themselves  with,  has  as  little  existence  in  fact  as  the  sud- 
den appearance  of  competitive  rent  among  the  original 
settlers  and  their  kin. 

The  loan  of  money  from  one  man  to  another  at  inter- 
est was,  until  a  comparatively  recent  period,  a  pure  trading 
upon  the  social  necessities  of  the  borrower;  in  the  same 
way  that  the  Indian  money-lender,  soucar,  shroff,  bunia,  or 
whatever  name  he  may  be  called  by,  trades  upon  the  social 
necessities  of  the  ryot  to-day,  when  the  latter  borrows 
money  at  sixty  per  cent,  to  spend  on  the  marriage  of  his 
daughter;  or  the  familiar  English  pawnbroker  trades  upon 
the  necessities  of  the  locked-out  worker,  when  he  lends  the 
workless  Englishman  money  at  twenty  or  thirty  per  cent. 
on  his  tools  or  his  furniture.  This  is  why  usury  was  so 
vehemently  denounced  throughout  the  period  when  capital- 
ism was  in  the  germ.  Enough  of  the  old  communal  in- 
stinct was  still  left  to  feel  outraged  at  this  money-monger- 
ing. 

But  the  borrowing  and  lending  of  money  at  interest 
nevertheless  attained  vast  proportions,  though  not  borrow- 
ing for  the  purpose  of  investment  or  speculation.  Great 
landowners,  successful  generals,  ambitious  politicians  bor- 
rowed in  order  to  be  able  to  display  greater  magnificence 
on  special  occasions,  to  give  larger  donations  to  the  popu- 
lace, or  to  buy  wider  political  influence.  The  smaller  men, 
the  small  free  farmers,  colonists,  and  the  like,  borrowed  for 
social  purposes  of  more  or  less  importance  to  them.  Simi- 
larly, the  great  noble  of  the  feudal  time  had  recourse  to 
the  money-lenders  in  order  to  go  well-equipped  to  the  Cru- 


INTEEEST  193 

sades,  or  to  make  a  fine  show  at  a  great  tournament,  and 
the  smaller  men  followed  in  his  wake. 

Yet  all  the  time  usury  was  regarded  as  a  crime,  and  law 
after  law  was  enacted  against  the  hated  money-lenders, 
even  by  merchants  who  were  in  effect  taking  interest  on 
money  themselves.  Money-lenders,  Jew  and  Christian 
alike,  were  always  fair  game.  Yet  they  still  prospered, 
and  throve  in  spite  of  the  law,  and  their  sacrifice  of  ears, 
noses,  teeth,  eyes,  and  even  life  itself.  In  England,  Act. 
13  Elizabeth,  cap.  8  of  1570,  confirming  the  Act  of  Edward 
VI,  Sec.  5,  proclaims,  in  view  of  the  fact  that  "  all  usury 
being  forbidden  by  the  law  of  God  is  sin  and  detestable," 
any  loans  on  which  less  than  ten  per  cent,  is  asked  render 
the  principal  liable  to  forfeiture;  and  loans  bearing  a 
higher  rate  of  interest  not  only  expose  the  lender  to  the 
loss  of  his  capital,  but  bring  him  within  the  grip  of  the 
law  for  severe  punishment  as  well.  This  Act  was  only 
repealed  in  1854  !  Needless  to  say  that  payment  of  interest 
had  been  fully  recognised  in  England  and  enforced  by  law 
long  before  that  date. 

The  change  in  the  view  of  interest  taken  in  modern 
times  as  compared  with  ancient  is,  of  course,  due  to  the 
fact  that  interest  in  the  twentieth  century  constitutes  as 
a  rule  only  a  participation  in  profit,  or  in  surplus  value, 
already  realised.  Or  in  the  case  of  state  or  municipal 
loans  the  interest  paid  is  in  fulfilment  of  an  obligation 
supposed  to  have  been  entered  into  with  the  full  consent 
of  the  whole  community.  No  moral  stigma  whai;ever  at 
present  attaches  to  the  making  of  profit,  nor,  consequently, 
to  the  taking  of  a  share  in  such  profit  when  made.  The 
alteration  of  conditions  came  about  with  the  rise  of  the 
present  complete  system  of  capitalist  production  for  profit. 


194  THE  ECONOMICS  OF  SOCIALISM 

Those  who  found  themselves  in  possession  of  money-capital 
acquired  by  commerce,  piracy,  or  slavery,  could  now  lend  it 
not  merely  to  feudal  magnates,  or  needy  freeholders,  but 
to  their  brother  capitalists,  in  the  sphere  of  active  produc- 
tion, who  wished  to  make  a  profit  out  of  the  labours  of 
others  by  employing  them  as  wage-earners  to  work  a  new 
machine  or  the  like. 

The  capitalist  who  directly  employs  his  hands  and  sees 
his  way  to  realise  a  satisfactory  amount  of  surplus-value, 
representing,  say,  a  profit  of  20  per  cent,  reckoned  on  the 
total  amount  of  capital  embarked,  borrows  the  whole  or  a 
portion  of  what  he  requires  from  the  capitalist  who  owns 
the  money,  and  agrees  to  pay  him  a  part  of  this  surplus- 
value  —  say,  5  per  cent. —  on  his  advance  in  the  shape  of 
interest.  The  capitalist  who  makes  this  loan  has,  as  a 
rule,  no  control  over  the  operations  of  the  borrower  —  at 
any  rate,  so  long  as  things  go  right  and  his  interest  is  paid, 
or  when  his  principal  is  paid  in  due  course.  He,  like  the 
landlord,  or  rent-receiver,  is  simply  a  sleeping  partner  in 
the  business. 

This  is  equally  true  whether  tlie  money  borrowed,  for 
which  interest  is  paid,  is  used  as  industrial  capital,  or  as 
trading  capital.  In  both  cases  the  lender  receives  his 
interest,  reckoned  for  this  purpose  at  5  per  cent.,  in  return 
for  parting  with  his  temporary  control  over  the  universal 
social  equivalent  for  exchange-value.  It  matters  not  at 
all  how  the  lender  came  by  the  money  he  advances; 
whether  he  inherited  it,  or  stole  it,  or,  as  assumed  above, 
made  it  in  trade.  He  obtains  interest  for  it  from  the 
borrower  as  a  portion  of  the  profit  realised,  not  as  a  reward 
for  his  abstinence, —  for  thrift  has  had  nothing  to  say  in 
the  whole  transaction  —  but  as  a  return  for  the  temporary 
loan  of  a  social  force,  namely,  money  capital,  which  it  is 


INTEEEST  195 

more  convenient  for  him  to  part  with,  under  restrictions, 
to  another,  than  to  use  himself. 

Interest,  then,  is  due  to  the  private  ownership  of  money, 
as  rent  is  due  to  the  private  ownership  of  land,  and  interest 
on  money  under  capitalism  takes,  for  the  most  part,  the 
shape  of  a  participation  in  profit.  But  the  amount  of 
private  capital  which  seeks  an  outlet,  in  the  direction  of 
such  a  participation  in  profit  under  capitalism  as  is  repre- 
sented by  the  payment  of  interest  for  an  advance,  soon  far 
surpasses  the  total  amount  of  coined  money  in  any  coun- 
try. With  the  expansion  of  banking  and  credit,  the  growth 
of  bills,  drafts,  clieques,  notes,  bonds,  shares,  and  so  forth, 
this  sort  of  loanable  capital  becomes  more  and  more  obvi- 
ously nothing  more  nor  less  than  a  series  of  orders  on  other 
men's  labour  estimated  in  imaginary  amounts  of  gold. 

As  this  loanable  capital,  real  or  nominal,  increases,  and 
security  for  the  payment  of  the  interest  and  repayment  of 
the  principal  is  enhanced  with  the  stability  of  any  given 
capitalist  society,  the  rate  of  interest  steadily  falls.  From, 
say,  10  per  cent,  to  start  with,  it  comes  down  to  4.  The 
amount  of  loanable  capital  on  offer  grows,  that  is  to  say, 
and  its  security  increases,  in  a  greater  ratio  than  the 
demand  for  it  at  the  current  rate  for  profit-making  pur- 
poses develops. 

How  purely  this  is  a  matter  of  social  convention  will  be 
apparent  from  the  following  illustration.  A  rich  man 
subscribes  capital  to  the  debentures  of  a  railway.  His 
advance,  which,  with  other  loans,  enables  labour  to  be 
turned  into  this  instead  of  some  other  channel,  bears  the 
fixed  rate  of  interest  of  4  per  cent.  If  now  he  cuts  off  the 
coupons  from  his  debentures  each  year,  and  allows  liis 
banker  to  collect  them  for  him  in  the  shape  of  cheques 
from  the   railway   company,   he   will   in   five-and-twenty 


196  THE  ECONOMICS  OF  SOCIALISM 

years,  by  simply  leaving  the  account  at  his  bank  without 
drawing  upon  it,  have  in  his  possession,  as  the  result  of 
receiving  these  bits  of  paper,  the  whole  amount  of  his 
original  advance,  and,  without  toil  or  trouble  on  his  part, 
will  be  able  to  command  twice  as  much  labour  as  he  could 
five-and-twenty  years  before.  If  lent  at  compound  interest 
all  the  time  very  much  more. 

More  than  this,  his  original  advance  will  not  only  be  as 
secure  as  it  was  to  begin  with,  but  the  railway  itself, 
assuming  the  social  convention  under  which  it  was  con- 
structed to  continue  in  force,  is  a  far  more  valuable  prop- 
erty than  it  was,  although,  owing  to  the  progress  of  mechan- 
ical invention,  it  could  probably  be  constructed  now  for 
half  the  cost.  In  fact,  monopoly  and  the  fall  in  the 
average  rate  of  interest  on  first-class  security,  owing  to 
other  capitalists  having  been  as  abstinent  and  as  saving 
as  himself,  has  greatly  enhanced  the  capital  value  of  his  de- 
bentures as  an  investment. 

But  it  by  no  means  follows  that  a  permanent  decrease 
in  the  current  rate  of  interest  means  that  the  interest- 
receivers  as  a  class  take  a  less  proportion  of  the  total 
product  of  the  community  than  they  did  at  the  higher 
rate,  in  return  for  having  done  themselves  the  honour  to 
be  born  capitalists,  or  for  having  arrived  at  the  sleeping 
capitalist  stage  of  existence,  as  "architects  of  their  own 
fortunes."  A  very  elementary  knowledge  of  arithmetic 
suffices  to  teach  us  that  even  two  per  cent,  per  annum  on  a 
million  sterling  is  equivalent  to  twice  ten  per  cent,  on  one 
hundred  thousand  pounds.  If,  tlierefore,  the  total  amount 
of  loanable  capital  aggregated  together  in  the  hands  of  the 
possessing  classes  and  lent  out  at  interest  increased  in  a 
far  greater  ratio  than  the  rate  of  interest  itself  has  fallen, 
as  unquestionably  was  the  case  in  Great  Britain  before 


INTEEEST  197 

the  war,  then,  clearly,  the  relative  expropriation  of  the 
results  of  social  industry  by  the  interest-receivers  has  in- 
creased, notwithstanding  the  fall  in  the  rate  of  interest  on 
first-class  security. 

Consequently,  the  argument  which  is  sometimes  used 
that  the  reduction  in  the  average  rate  of  interest  consti- 
tutes of  itself  an  advance  towards  an  improved  system  of 
production  and  distribution  cannot  be  maintained.  The 
active  capitalist  may  be  able  to  borrow  the  whole  or  a  por- 
tion of  his  necessary  capital  from  the  sleeping  partner,  the 
lender,  at  a  lower  rate  than  before;  but  in  order  to  carry 
out  his  business  operations,  on  the  more  extended  scale 
required  by  modern  industry,  he  will  have  to  borrow  larger 
amounts  than  before,  and  the  total  surplus  value  extracted 
from  the  toil  of  the  workers  is  greater  than  ever. 

A  low  bank-rate  of  discount,  such  as  England  used  to 
enjoy,  carrying  with  it  a  low  rate  of  interest  on  deposits 
in  the  various  banks,  only  signifies  that  confidence  having 
been  shaken  by  great  failures,  and  the  initiation  of  large 
enterprises,  which  has  passed  from  the  adventurous  mer- 
cantile class  to  the  timid  financial  class,  having  been 
checked,  the  amount  of  loanable  capital  to  deal  with  first- 
rate  mercantile  bills  drawn  against  produce,  or  to  lend  on 
high-class  securities  already  on  the  market,  outgrew  the 
requirements  of  this  particular  market.  The  coupon- 
cutters  and  interest-accumulators,  in  fact,  by  their  "  absti- 
nence "  piled  up  deposits  to  their  credit  to  such  an  enor- 
mous extent  that  they  reduced  their  own  rate  of  interest 
by  the  over-supply  to  the  demand.  These  deposits  are,  let 
it  be  said  agaiu,  purely  matters  of  social  convention,  repre- 
senting paper  orders  on  other  men's  labour;  from  the 
unpaid  portion  of  which  labour,  interest,  like  rent  and 
profit,  is  derived. 


198  THE  ECONOMICS  OF  SOCIALISM 

Professor  Bohm-Bawerk  and  writers  of  his  school  have 
been  at  great  pains  to  discover  some  basis  for  interest  other 
than  a  participation  in  the  surplus  value  squeezed  out  of 
the  labourers,  owing  to  a  class  monopoly  of  money-capital 
and  credit.  Similar  efforts,  as  already  observed,  have  been 
made  by  other  economists,  most  bitterly  opposed  to  the 
exaction  of  rent  by  landlords,  to  place  interest  and  profit 
on  an  ethical  footing  as  between  man  and  man.  But  our 
modern  social  conditions  admit  of  no  weak  moralising  of 
this  sort  on  the  assumption  of  mutual  service  rendered. 

From  the  ethical  point  of  view,  with  which  here  we  have 
nothing  to  do,  wage-slavery  is  to  the  full  as  immoral  as 
slavery.  From  the  point  of  view  of  the  active  capitalist 
and  direct  employer  of  labour  —  the  "captain  of  indus- 
try," the  well-paid  villicus  of  our  day  —  the  sleeping  capi- 
talist partner  who  lends  money  at  interest,  no  doubt 
renders  him  a  service  by  enabling  him  to  extend  his  opera- 
tions, and  obtain  larger  profits  by  the  use  of  such  borrowed, 
capital.  But  from  the  point  of  view  of  the  actual  pro- 
ducers neither  the  one  nor  the  other  renders  any  service 
whatever.  They  both  merely  take  a  portion  of  the  sur- 
plus-value, with  which  the  wage-earners  are  compelled  by 
necessity  to  furnish  them,  in  the  shape  of  unpaid  labour 
embodied  in  commodities;  standing  in  this  respect  prac- 
tically on  the  same  footing  as  landlords,  bankers,  merchants, 
lawyers,  brokers,  clergymen,  company-promoters  and  other 
encumbrancers. 

The  truth  about  interest  and  its  source  in  modern  capi- 
talist society  is  disguised  from  superficial  observers,  because 
it  appears,  in  ordinary  business  affairs,  as  a  transaction 
between  two  different  sets  of  capitalists.  Banks  and  loan- 
agencies  of  various  kinds  lend  their  deposits,  consisting  of 
capital  accumulated  out  of  the  surplus-value  appropriated 


INTEREST  199 

from  unpaid  labour,  in  the  various  spheres  of  industry,  to 
persons  possessed  of  good  security  who  are  engaged  in 
different  capitah'st  businesses.  Without  entering  upon  the 
diverse  forms  which  these  advances  take,  it  is  quite  clear 
that  interest  on  money  of  itself  creates  no  value.  Conse- 
quently, interest  in  every  case  is  a  participation  in  the 
social  surplus-value  created  by  labour,  and  can  have  no 
other  origin.  The  attribution  of  value-creation  to  the 
"  thrift  "  or  "  abstinence  "  of  sleeping-partner  capitalists 
is  an  absurdity  so  ludicrous  that  discussion  of  it  would  be 
mere  waste  of  space. 


CHAPTER  VIII 

WAGES 

Wages  have  been  paid  to  labourers  throughout  a  very 
long  period  in  the  history  of  industry,  and  the  variations 
in  their  relation  to  the  cost  of  subsistence  have  been 
strongly  marked.  The  rates  paid  also  to  skilled  and  un- 
skilled labourers  and  to  town  and  country  labourers  have 
almost  invariably  been  very  different.  But  never  before 
the  complete  capitalist  system  was  organised  have  the  vast 
majority  of  the  workers  (as  well  as  the  attendants  upon  the 
parasitical  classes)  been  compelled  to  depend  upon  wages 
earned  by  the  sale  of  their  labour-power  for  their  sole 
source  of  subsistence,  as  is  the  case  with  the  propertyless 
class  in  Great  Britain  to-day.  In  other  civilised  countries, 
as  already  said,  a  very  large  proportion  of  the  population 
is  still  settled  upon  the  land  aud,  terribly  hard  as  is  the 
work  of  the  farmers,  peasants,  small  holders  and  share-of- 
produce  cultivators,  they  are  not  directly  dependent  upon 
the  capitalist  for  their  food,  housing,  clothing  and  small 
luxuries.  In  most  cases,  much  of  what  they  need  they 
produce  themselves.  It  is  an  arduous  and  exhausting  life, 
but,  so  long  as  those  who  live  it  can  keep  out  of  debt,  an 
independent  one. 

Nothing  of  the  kind,  on  any  appreciable  scale,  remains 
in  Great  Britain.  The  non-possessing  class  in  this  island 
is  essentially  a  proletarian  class.  It  possesses  no  property. 
The  agricultural  labourers  are  as  much  the  "  hands  "  of 

the  farmers,  as  the  factory  operatives  are  the  "  hands  "  of 

200 


WAGES  201 

the  industrial  capitalists.  Moreover,  until  lately,  the  bulk 
of  these  agricultural  labourers  were  so  completely  unorgan- 
ised, and  so  miserably  paid  and  housed,  that  they  were 
even  more  dependent  upon  the  capitalist  farmers,  over  the 
greater  part  of  the  country,  than  the  industrial  workers 
and  artisans  were  upon  the  town  capitalists.  This  is  the 
reason,  apart  from  the  earlier  growth  of  the  capitalist  sys- 
tem of  production  in  England,  why  this  island  is  still  used 
as  the  classical  example  of  the  entire  field  of  exploitation 
of  labour  and  manufacture  for  profit. 

Now,  as  already  frequently  stated,  people  who  possess 
no  property,  and  are  destitute  of  the  prospect  of  inheriting 
or  obtaining  any  property,  have  only  one  saleable  com- 
modity at  their  disposal,  by  parting  with  which  they  can 
acquire  the  means  of  subsistence  and  shelter  for  themselves 
and  their  families.  This  commodity  is  labour-power:  the 
power  of  labour  comprised  within  their  own  bodies :  the 
power  of  labour,  the  power  which  alone  when  put  into 
operation  for  producing  useful  articles  can  embody  value 
in  commodities  by  application  to  raw  materials,  &c.  This 
power  at  the  disposal  of  propertyless  human  beings  the 
active  capitalists,  whose  existence  as  capitalists  depends 
upon  the  continuous  production  of  such  commodities,  is 
ready  to  buy  at  a  price.  That  price  consists  of  wages  paid 
for  the  labour-power  whose  functioning  is  advanced  to  the 
capitalists  for  a  specific  purpose,  till  the  expiration  of  a 
week,  a  fortnight  or  a  month. 

This  labour-power  so  advanced  on  credit  to  the  capi- 
talists becomes  their  property  for  the  time  being  as  a  living 
commodity,  like  other  commodities  bought  and  used  in  the 
course  of  production.  It  is  used  by  them  to  create,  by  its 
expenditure,  articles  of  social  use  which  can  be  sold  at  a 
profit:  such  profit  being  derived  from  the  value  over  and 


20S  THE  ECONOMICS  OF  SOCIALISM 

above  the  wages  paid  for  the  advance  of  the  labour-power 
which  is  embodied  in  the  commodities  produced  under  the 
capitalists'  absolute  control. 

Now  what  was  the  rate  of  wages  paid  to  the  workers  of 
Great  Britain  prior  to  the  war?  It  is,  of  course,  impos- 
sible to  average  correctly  rates  of  wages  running  from  12s. 
to  15s.  a  week  to  agricultural  labourers  in  the  Southern 
Counties  up  to  the  36s.  paid  to  members  of  the  Amal- 
gamated Society  of  Engineers  in  London  or  the  still  higher 
wages  paid  to  compositors,  or  plumbers.  The  standard  of 
life,  the  amount  of  rent  paid  for  housing  and  the  general 
conditions  differ  too  widely  for  accurate  comparison.  But 
it  is  certain  that,  whether  the  vendor  of  labour-power  be  a 
so-called  "  unskilled  "  agricultural  labourer,  or  a  highly- 
skilled  artisan,  "  it  cannot  be  maintained  that  at  any  rate 
the  food,  clothing,  etc.,  necessary  to  keep  the  labourer  in 
the  most  efficient  condition  will  give  us  a  minimum  below 
which  the  self-interest  of  emploj^crs  .  .  .  will  not  suffer 
wages  to  fall."     (Henry  Sidgwick.) 

This  means  that,  along  the  whole  line,  employers  pur- 
chase labour-power  at  the  lowest  possible  point  decreed  by 
competition,  regardless  of  whether  a  sufficient  subsistence 
is  or  is  not  afforded  to  the  labourer  himself.  Hunger  in- 
stead of  the  whip  is  also  the  impelling  motive  in  such 
competition.  The  wage-earner  is  forced,  in  order  merely 
to  live  up  to  the  standard  of  life  in  his  particular  trade, 
to  accept  the  average  or  Trade  Union  rate  of  wages  as 
established  by  custom  and  agreement.  He  is  thus  virtu- 
ally the  wage-slave  of  the  employing  class,  whether  he  be 
paid  a  high  or  low  scale  of  wages.  Whether,  also,  he  be 
a  low-grade  or  a  high-grade  wage-earner,  unemployment  for 
three  months  at  the  very  outside  will  see  him  stripped  of 
his  small  savings,  denuded  of  his  little  furniture  and  his 


WAGES  203 

wife's  trinkets,  and  swept  down  into  absolute  penury. 
This  anxiety  concerning  unemployment  and  destitution, 
from  which  the  superior  grade  of  chattel-slave  did  not 
suffer,  weighs  constantly  upon  the  modern  wage-earner; 
while  strikes  to  resist  reduction  of  wages  or  unfair  treat- 
ment of  any  sort  from  the  emplo3'er  throw  him  upon  his 
scant  Trade  Union  funds  and  often  end  in  failure,  or  little 
short  of  it,  after  weeks  of  privation. 

Thus  the  economic  and  social  position  of  even  the  high- 
est-paid wage-earner,  who  at  times  may  earn  exceptional 
remuneration,  remains  almost  as  insecure  and  his  surround- 
ings are  not  very  far  from  being  as  depressing,  as  those  of 
the  workers  of  a  much  lower  grade.  Only  by  stinting 
himself  and  his  family  and  accumulating  savings  by  par- 
simonious and  physically  injurious  thrift  can  he  hope  to 
rise  out  of  his  class  into  the  employing  class  above.  This 
possibility  becomes  more  and  more  remote  every  year,  as 
the  necessary  amount  of  capital  to  start  in  business  in- 
creases; nor  does  the  ownership  of  shares  in  the  mills  where 
he  is  employed  tell  much  in  the  direction  of  greater  inde- 
pendence. He  is  drawn  in  some  measure  into  the  whirl- 
pool of  capitalist  industrialism  with  little  advantage  to 
himself.  The  small  profits  he  obtains  are,  in  any  case, 
drawn  from  the  surplus-value  created  out  of  his  own  unpaid 
labour.  Individually,  here  and  there,  he  may  be  tempo- 
rarily and  apparently  a  gainer.  But,  in  the  long  run,  born 
a  wage-earner,  a  wage-earner  he  will  remain  to  the  end  of 
his  working  life,  so  long  as  the  system  continues. 

Furthermore,  the  very  highly-paid  wage-earner,  even  if, 
in  good  times,  in  the  United  States,  he  drives  to  his  daily 
work  in  a  Ford  motor-car,  is  economically  speaking,  just  as 
much  a  wage-slave  as  the  carefully-nourished,  educated 
slave  of  Crassus  remained  a  chattel-slave,  though  his  lot 


204  THE  ECONOMICS  OF  SOCIALISM 

was  far  superior  to  tliat  of  the  slaves  of  the  same  owner 
toiling  on  the  land.  In  short,  what  Robert  Owen,  himself 
an  employer  of  labour  on  a  large  scale,  said  of  the  capi- 
talist, wage-earning,  profit-making  system,  at  the  end  of 
the  eighteenth  century,  is  just  as  true  at  the  beginning  of 
the  twentieth  century :  "  Under  capitalism  a  man  [or  a 
woman]  must  be  either  a  slave-driver,  or  a  slave." 

Now,  however,  disregarding  the  various  grades  of  remun- 
eration in  the  wage-earning  class,  conditioned  by  skill, 
effective  Trade  Union  combinations,  and  apprenticeship, 
&c.,  what  was  the  amount  of  surplus-value,  that  is  to  say 
unpaid  labour,  extracted  from  the  producers  and  essentially 
necessary  social  distributors,  prior  to  the  great  war?  To 
arrive  at  this  amount  and  its  ratio  to  the  total  of  yearly 
national  income  —  the  word  "  income  "  by  the  way  is  quite 
incorrect  as  applied  to  the  wage-earning  class  —  I  make 
use  of  the  statistics  given  by  Chiozza-Money  in  his  useful 
little  book,  "The  Nation's  Wealth."  The  total  national 
revenue  is  put  there  at  £1,844,000,000.  Of  this  sum, 
the  productive  wage-earners  are  credited  with  receiving 
£703,000,000.  But  that  figure  is  excessive.  To  begin 
with,  it  includes  the  remuneration  of  domestic  servants, 
obviously,  in  the  main,  a  purely  parasitical  class.  There 
were  some  2,000,000  such  servants  up  to  1914.  Taken  as 
a  whole,  their  remuneration  would  be  understated  at 
£100,000,000  a  year.  This  leaves  to  the  useful  wage- 
earners,  roughly,  only  £600,000,000.  But  out  of  thia 
£600,000,000,  again,  it  is  reasonable  to  deduct  from  the 
net  wages  the  rent  paid  back  to  the  possessing  and  employ- 
ing class  for  the  wretjhed  housing  accommodations  pro- 
vided for  the  wage-earners  as  a  whole.  How  much  would 
that  be?  Not  far  short  of  another  £100,000,000,  reckoning 
that  the  workers  of  "Great  Britain  pay  on  the  average  one- 


WAGES  205 

sixth  of  their  weekly  wages  for  housing.  But,  in  order  to 
be  well  within  the  mark,  let  only  £60,000,000  be  deducted 
for  rent  paid  to  the  property-o^^Tiers  out  of  the  remunera- 
tion accorded  to  the  wage-earners.  We  have  then 
£703,000,000,  less  £100,000,000,  less  again  £60,000,000,  or 
£543,000,000  in  all,  as  the  actual  payment,  calculated  on 
this  basis,  made  annually  to  the  productive  and  necessary 
distributive  wage-earners  of  Great  Britain  up  to  1914.  I 
consider  this  sum  to  be  still  too  large  for  the  facts,  and  no 
allowance  is  made  for  the  heavy  pressure  and  consequent 
reduction  due  to  bad  trade. 

But  taking  £543,000,000  as  the  total  amount  of  wages 
paid  to  the  actual  necessary  workers  of  the  community  out 
of  the  grand  total  of  £1,844,000,000,  and  it  appears  that 
the  non-producing  class  and  their  parasites  (including 
petty  distributors  who  are  economically  useless)  the  pro- 
portion of  paid  to  unpaid  labour  in  Great  Britain  is  repre- 
sented by  the  ratio  of  £543,000,000  to  £1,844,000,000,  or, 
in  round  figures,  1  to  3I/2,  This  means  that  every  useful 
worker  in  the  country  does  one  hour's  work  for  himself 
and  three  and  a  half  hour.>'  work  for  non-producers:  the 
ratio  of  unpaid  to  paid  labour  being  7  to  2.  Make  what 
allowance  we  please  for  due  remuneration  to  doctors,  sur- 
geons, nurses,  teachers,  "  organisers  of  labour,"  architects, 
necessary  small  distributors  and  the  like,  and  we  have  here 
a  social  and  economic  system  erected  on  a  most  precarious 
foundation. 

There  is  also  a  section  of  the  wage-earning  problem 
which,  though  well  known  to  exist,  has  never  received  due 
consideration  either  from  bourgeois  political  economists  or 
from  our  capitalist  society  as  a  whole :  nor  certainly  has 
any  organised  and  continuous  attempt  been  made  to  remedy 
the  evils  resulting  from  this  admitted  fact  by  society  as  a 


206  THE  ECONOMICS  OF  SOCIALISM 

whole.  Labour-power  is  sold  at  its  cost  of  subsistence  and 
reproduction  to  the  capitalist.  But  a  large  proportion  of 
it  is  habitually  sold  by  the  workers  in  capitalist  countries 
at  wages  which  preclude  its  owners  and  vendors  from 
obtaining,  by  the  purchasing  value  of  their  wages,  a 
standard  of  life  sufficient  to  enable  them  and  their  families 
to  maintain  themselves  in  reasonable  health  and  comfort. 
In  London,  in  particular,  it  was  established  by  the  investi- 
gations of  the  Social-Democratic  Federation,  so  long  ago 
as  1884-1887,  that  more  than  twenty-five  per  cent,  of  the 
working  class  lived  on  a  rate  of  wages  which  rendered  the 
continuance  of  such  miserable  poverty  inevitable.  The 
accuracy  of  the  statistics  published  by  the  Social-Demo- 
crats of  a  number  of  average  streets  in  the  poorer  districts 
of  the  metropolis  was  challenged  and  tbeir  arugments  based 
upon  them  were  widely  denounced  by  the  capitalist  press 
as  gross  exaggeration.  A  wealthy  shipowner  took  up  the 
subject,  in  order  to  prove  that  the  facts  were  not  as  stated. 

As  the  originator  of  the  inquiry  by  the  Social-Democratic 
Federation,  I  watched  for  the  result  of  this  further  more 
elaborate  and  expensive  work  with  great  interest.  The  sta- 
tistics obtained  proved  conclusively  that  more  than  thirty 
per  cent.,  not  five-and-twenty  per  cent.,  were  perpetually 
living  under  the  degrading  social  conditions  of  under- 
payment, overcrowding  and  insufficient  nutrition.  And  so 
they  are  at  the  time  of  this  writing. 

The  capitalist  class  of  London  and  Great  Britain  with 
the«Government  of  the  day  has  paid  no  more  attention  to 
the  facts  when  they  were  conclusively  established  beyond 
possibility  of  refutation  by  one  of  their  own  order  than 
they  did  when  they  were  first  made  public  by  the  Social- 
Democratic  Federation.  Moreover,  so  long  as  our  capi- 
talist, competitive,  wage-earning  production  for  profit  goes 


WAGES  207 

on,  so  long  will  this  state  of  things  endure,  not  only  in 
London  but  in  all  the  largest  industrial  and  commercial 
centres  of  Great  Britain.  Averages  are  proverbially  illu- 
sory as  evidences  of  well-being  in  social  affairs;  but  it 
would  appear  to  be  a  crushing  condemnation  of  the  entire 
wage-paying  system  that  so  large  a  percentage  of  useful 
workers  should,  as  acknowledged,  be  living  under  hopeless 
conditions  of  this  sort.  Obviously,  so  low  a  standard  of 
life,  for  so  large  a  proportion  of  the  industrial  population, 
tends  to  keep  down  the  rate  of  remuneration  for  the  rest. 

Since  August,  1914,  the  economic  conditions  in  Great 
Britain  and  all  over  the  world  have  been  quite  abnormal. 
The  great  and  inevitable  decrease  of  production  during  the 
war  and  the  large  demand  for  commodities  which  ensued 
on  the  peace,  aggravated  by  the  over-issue  of  paper  money 
and  excessive  expenditure  and  waste,  led  to  a  very  heavy 
rise  of  prices  in  every  department.  This  was  necessarily 
followed  by  a  demand  for  higher  wages  and  still  higher 
wages  throughout  the  various  industries,  many  of  the 
advances  being  preceded  by  strikes  or  threats  of  strikes 
unless  the  claims  of  the  workers  were  conceded.  It  is 
doubtful,  however,  whether  the  additional  wages  obtained 
represented  on  the  average  more  than  a  nominal  gain. 
Such  real  advantages  as  fell  to  the  lot  of  the  workers  at 
home  occurred  between  1914  and  the  beginning  of  1919, 
due  to  circumstances  whose  consideration  lies  outside  the 
scope  of  this  volume.  The  temporary  home  demand  for 
goods  of  all  sorts  in  the  two  years  succeeding  the  armistice 
and  the  good  trade  which  followed  soon  fell  off.  Great 
Britain,  in  consequence  of  the  policy  of  systematic  neglect, 
favoured  by  the  Government,  is  now  going  back  to  the 
conditions  which  prevailed  before  the  period  of  hostilities 
when,  in  spite  of  all  the  laudations  of  capitalist  laissez- 


208  THE  ECONOMICS  OF  SOCIALISM 

faire  as  beneficial  to  the  people,  the  bulk  of  the  wage- 
earning  class  was  living  from  hand  to  mouth  on  a  low 
standard  of  subsistence. 

But  the  influence  of  the  war  upon  the  class  struggle  has 
been  very  considerable  in  all  countries,  and,  as  might  be 
expected,  especially  in  our  own,  the  most  advanced  country. 
Trade  Unionism  has  gained  enormously  in  strength.  Com- 
bined Labour  was  never  nearly  so  powerful  in  this  island. 
The  numbers  of  Trade  Unionists  have  increased  by  leaps 
and  bounds,  no  fewer  than  6,500,000  disciplined  workers 
being  represented  at  the  Congress  at  Portsmouth.  More- 
over, the  tendency  is  to  coalesce  the  large  separate  Unions 
into  closer  and  closer  solidarity.  It  is  within  the  power  of 
a  few  of  these  combined  forces  to  hold  up  the  entire  trade 
of  the  island  on  a  mere  question  of  wages,  and  the  working- 
class  leaders  not  only  negotiate  on  equal  terms  with  the 
Prime  Minister  and  other  members  of  the  Cabinet  but  the 
hostile  capitalist  press  reports  the  speeches  on  both  sides 
almost  verbatim.  This  in  itself  is  an  extraordinary 
change,  brought  about  within  a  very  short  period. 

On  the  other  hand,  the  growth  of  fighting  organisations, 
rings  and  trusts  on  the  side  of  the  capitalists  has  been 
almost  equally  remarkable.  In  several  trades  something 
little  short  of  complete  monopolies  have  been  created  — 
national  monopolies  with  international  relations.  In  the 
building  trade  it  is  calculated  that  from  300  to  600  per 
cent,  profit  is  realised  by  the  different  rings  in  the  various 
departments  of  the  industry,  on  the  materials  required, 
before  the  builders  themselves  and  their  workers  begin  to 
carry  out  any  contract.  No  method  yet  devised  has  been 
able  to  cope  with  such  excessive  profiteering. 

As  a  consequence,  even  Trade  Unionists  are  beginning  to 
learn  that  mere  efforts  for  higher  wages  cannot,  even  if 


WAGES  209 

successful,  assure  permanent  well-being  for  the  workers  of 
the  community.  This  has  led  to  stronger  and  stronger 
claims  for  nationalisation  and  socialisation  of  mines,  rail- 
ways, shipping,  factories,  the  land,  &c.  Such  claims  must 
end  sooner  or  later  in  a  clear-cut  programme  for  the  aboli- 
tion of  the  wages  system  altogether  and  the  substitution 
of  complete  social  cooperation  for  anarchical  competition. 
The  increasing  disposition  of  the  great  Cooperative  Socie- 
ties, who  supply  upwards  of  a  fourth  of  the  consumers,  to 
make  common  cause  with  the  Working  Class  Organisations, 
politically  and  economically,  must  help  or  nd  facilitate 
this  transformation  —  the  greatest  revolution  of  all  time. 


CHAPTER  IX 

INDUSTRIAL   CRISES 

In  a  previous  chapter  I  dealt  with  the  circulation  of 
commodities,  and  showed  how  necessary  it  is  that  the  con- 
tinuity of  the  stream  should  not  be  interrupted.  Any 
interruption,  from  whatever  cause,  means  a  temporary 
stoppage  round  the  whole  circle,  and  a  consequent  break- 
down in  all,  or  nearly  all,  departments  of  trade.  It  is 
common  among  those  who  have  not  fully  considered  the 
conditions  of  modern  capitalist  production  to  contend  that 
there  is  practically  no  difference  between  the  disturbance 
of  business  which  arises  in  modern  times,  and  that  whicli 
can  be  traced  in  ancient  history,  or  in  countries  where  the 
older  forms  of  production  remain  to  this  day. 

Thus  a  famine,  a  drought,  a  war,  a  pestilence,  have  fre- 
quently occasioned,  not  merely  a  temporary  but  a  wide- 
spread suspension  of  business  relations,  inflicting  the 
greatest  hardship  on  large  populations.  This  can  occur 
as  easily  under  the  ancient  primitive  communism  as  under 
chattel  slavery  or  feudalism.  In  such  circumstances,  any 
great  natural  upset  of  the  existing  society  would  bring 
about  very  serious  distress.  But  this  was  due  to  the  lack 
of  the  necessaries  of  life,  or  other  requirements  of  tiie 
society  of  that  time.  That  people  should  be  going  un- 
clothed or  unfed,  where  but  shortly  before  they  had  been 
in  full  employment  at  good  pay,  merely  by  reason  of  the 
over-abundance  of  the  goods  whicli  they  themselves  had 
produced  and  circulated,  this  is  a  peculiarity  of  modern    > 

210 


INDUSTRIAL  CEISES  211 

times,  and  a  phenomenon  wholly  unknown  before  the 
establishment  of  the  capitalist  system.  Under  present 
conditions,  it  is  positively  the  excess  of  wealth  produced, 
over  what  economists  call  "  the  efi'ective  demand  "  for  it, 
that  results  in  those  recurring  crises  which  now  come  more 
frequently  than  ever  before. 

The  difficulty  of  harmonising  the  relations  of  produc- 
tion, when  once  capitalism  and  production  for  profit  be- 
came the  rule  rather  than  the  exception,  was  soon  per- 
ceived. Our  early  Poor  Laws  were  to  some  extent  an 
attempt  to  deal  with  this  difficulty.  The  famous  Sir 
William  Petty,  from  whom  I  have  previously  quoted,  saw 
clearly  that  the  problem  of  the  unemployed  of  his  day 
ought  to  have  been  dealt  with  by  the  collective  agency  of 
the  whole  community.  As,  for  example :  "  Those  who 
cannot  find  work  (though  able  and  willing  to  perform  it), 
by  reason  of  the  unequal  application  of  hands  to  lands, 
ought  to  be  provided  for  by  the  magistrate  and  landlord 
till  that  can  be  done;  for  there  needs  be  no  beggars  in 
countries  where  there  are  many  acres  of  unimproved  im- 
proveable  land  to  every  head  as  there  are  in  England." 

Again,  the  equally  famous  John  Bellers,  writing  a  little 
later,  found  the  same  problem  of  deserving  unemployed 
facing  him,  and  he  says :  "  By  computation,  there  is  not 
above  two-thirds  of  the  people  or  families  of  England  that 
do  raise  all  necessaries  for  themselves  and  the  rest  of  the 
people  by  their  labour;  and  if  the  one-third,  which  are  not 
labourers,  did  not  spend  more  than  the  two-thirds  which 
are  labourers,  one-half  of  the  people  or  families  labouring 
could  supply  all  the  nation."  And,  therefore,  it  is  "  a 
certain  demonstration  of  the  illness  of  the  method  the 
people  are  employed  in  if  they  cannot  live  by  it;  nothing 
being  more  plain  than  that  men  in  proper  labour  and  em- 


212  THE  ECONOMICS  OF  SOCIALISM 

ployment  are  capable  of  earning  more  than  a  living." 
"  With  many  commodities  the  market  is  over-stocked 
(and  what  is  the  best  dinner  worth  to  a  full  stomach),  which 
is  the  great  unhappiness  of  many  of  our  mechanics,  that 
they  make  commodities  when  nobody  wants  them.  And 
then  they  pine  and  starve  whilst  they  are  waiting  for  a  cus- 
tomer that  will  give  bread  for  their  manufactures  (or  money 
to  buy  bread),  whereas  the  same  labour  in  husbandry  they 
used  in  making  them  manufactures  would  have  raised 
much  more  food  than  the  money  they  got  for  their  manu- 
factures will  buy  them,"  and  partly  from  a  more  serious 
cause,  for  "  as  traders  are  useful  in  distributing,  it  is  only 
the  labour  of  the  poor  that  increaseth  the  riches  of  the 
nation,  and  though  there  cannot  be  too  many  labourers  in  a 
nation  if  their  employments  are  in  due  proportion,  yet 
there  may  be  too  many  traders  in  a  country  for  the  number 
of  labourers,  and  then  some  must  fail  for  the  want  of  trade 
to  support  them,  from  whence  they  become  sharping  or 
distressed,  not  being  used  to  work,  and  the  nation  the 
poorer  by  the  loss  of  their  labour. 

"  Traders  may  grow  rich  while  a  nation  grows  poor 
through  extravagancy;  for  when  the  dealers  may  get 
twenty  thousand  pounds  by  claret,  the  nation  pays  and 
spends  one  hundred  thousand  pounds  for  it,  and  nobody 
grows  rich  by  drinking  it,  whatever  the  seller  doth.  Land 
and  labour  are  the  foundation  of  all  riches,  and  the  fewer 
idle  hands  we  have  the  faster  we  increase  in  value ;  and 
spending  less  than  we  raise  is  a  much  greater  certainty  of 
growing  rich  than  any  computation  that  can  be  made 
from  our  exportation  a  id  importation." 

Thus  early  we  see  that  the  excess  of  commodities  in  one 
department  might  be  the  occasion  of  serious  distress  to  the 
producers.     This  again  would  re-act  upon  tliose  from  whom 


INDUSTEIAL  CEISES  213 

they  themselves  were  accustomed  to  huy,  raising  great 
difficulties  in  the  way  of  subsistence  for  many,  by  reason 
of  that  very  original  excess.  It  is  sometimes  argued  that 
this  is  still  true,  and  that  although  it  is  possible  that  there 
may  be  too  much  of  one  commodity  produced,  it  is  impos- 
sible that  there  should  be  a  glut  in  every  department  of 
trade  at  the  same  time.  Unfortunately,  however,  that  is 
precisely  what  occurs,  and  has  been  exemplified  in  every 
great  crisis  that  the  last  century  suffered  from.  This  was 
true  even  of  the  great  home  crisis  that  followed  upon  the 
peace  of  1815. 

Everybody  thought  that  peace  would  bring  with  it  great 
prosperity,  but  it  was  found,  to  the  astonishment  of  all, 
that  so  far  from  the  cessation  of  war  benefiting  the  working 
population,  at  the  commencement  it  made  things  consid- 
erably worse  than  they  had  been.  The  reason  for  this  was 
given  clearly  at  the  time  by  Robert  Owen,  who  said  that  the 
crisis  or  stagnation  in  trade  was  due  to  the  great  encour- 
agement given  to  new  mechanical  inventions  and  chemical 
discoveries,  which  superseded  manual  labour  in  supplying 
the  materials  required  for  warlike  purposes,  and  these, 
direct  and  indirect,  were  innumerable.  "  The  war  was  the 
great  and  most  extravagant  customer  of  farmers,  manufac- 
turers, and  other  producers  of  wealth,  and  many  during 
this  period  became  very  wealthy.  The  expenditure  of  the 
last  year  of  the  war,  of  this  country  alone,  was  one  hun- 
dred and  thirty  million  pounds  sterling,  or  an  excess  of 
eighty  millions  of  pounds  sterling  over  the  peace  expendi- 
ture. And  on  the  day  on  which  peace  was  signed,  this 
great  customer  of  the  producers  died,  and  prices  fell  as 
the  demand  diminished,  until  the  prime  cost  of  the  articles 
required  for  war  could  not  be  obtained.^'  "  Barns  and 
farmyards  were  full,  warehouses  loaded,  and  such  was  our 


214  THE  ECONOMICS  OF  SOCIALISM 

artificial  state  of  society  that  this  very  superabundance  of 
wealth  was  the  sole  cause  of  the  existing  distress.  Burn 
the  stock  in  the  farmyards  and  warehouses,  and  prosperili/ 
would  immediately  recommence  in  the  same  manner  as  if 
the  war  had  continued.  This  want  of  demand  at  remu- 
nerating prices  compelled  the  master  producers  to  consider 
what  they  could  do  to  diminish  the  amount  of  their  produc- 
tions and  the  cost  of  producing,  until  these  surplus  stocks 
could  be  taken  out  of  the  market.  To  effect  these  results, 
every  economy  in  producing  was  resorted  to,  and  men 
being  more  expensive  machines  for  producing  than  mechan- 
ical and  chemical  inventions  and  discoveries,  so  extensively 
brought  into  action  during  the  war,  the  men  were  dis- 
charged, and  the  machines  were  made  to  supersede  them  — 
while  the  numbers  of  the  unemployed  were  increased  by  the 
discharge  of  men  from  the  army  and  navy.  Hence  the 
great  distress  for  want  of  work  among  all  classes  whose 
labour  was  so  much  in  demand  while  the  war  continued. 
This  increase  of  mechanical  and  chemical  power  was  con- 
tinually diminishing  the  demand  for,  and  value  of,  manual 
labour,  and  would  continue  to  do  so,  and  would  effect 
great  changes  throughout  society." 

Taking  away  from  these  statements  the  disturbing  ele- 
ment of  war,  Eobert  Owen  gives  here  a  practical  analysis 
of  what  modern  industrial  crises  are.  They  arise  from  a 
superabundance  of  commodities  having  l)eGu  produced  rela- 
tively to  the  "effective  demand,"  thus  checking  the  circu- 
lation which  has  been  insisted  upon  as  essential. 

Fourier,  who  observed  the  first  really  great  international 
crisis  of  1825,  noted  Ihat  this  excessive  accumulation  of 
commodities  was  the  main  feature  of  the  disturbance,  and 
from  that  time  to  this,  on  each  successive  occasion,  the 
same  state  of  things  can  be  noticed. 


INDUSTEIx\L  CRISES  215 

Before  giving  a  short  summary  of  these  international 
crises,  of  which  there  were  eight  or  nine  in  the  last  cen- 
tury —  coming  at  intervals  constantly  decreasing,  and  their 
effects  lasting  longer  when  they  came  —  it  may  be  well  to 
give  the  full  theory  of  such  crises,  under  a  system  of  free, 
competitiv^e  capitalist  production,  from  the  point  of  view 
of  scientific  economy. 

Our  present  society  moves  and  has  its  being  in  a  whole 
series  of  antagonisms.  As  already  insisted  upon  more  than 
once,  the  fundamental  antagonism,  so  to  say,  is  that  be- 
tween the  social  form  of  the  method  of  producing  wealth 
and  the  individual  form  of  its  appropriation  and  exchange, 
which  still  continues.  The  fundamental  antagonism  is  fol- 
lowed and  accompanied  by  the  antagonism  between  the 
organisation  which  exists  in  each  individual  factory,  farm, 
or  workshop,  and  the  complete  anarchy  which  prevails  in 
the  exchange.  The  organisation  during  the  process  of 
production  is  pushed  to  the  highest  possible  point ;  so  much 
so  that  any  one  set  of  hands  coming  late  to  a  factory  renders 
it  impossible  for  the  whole  great  engine  of  industry  to  act 
properly.  And  employers  take  very  good  care  to  see  that 
discipline  in  this  respect  is  completely  maintained.  But 
when  we  come  to  deal  with  the  products  that  are  created  by 
the  industry  of  this  socially  organised  whole,  we  discover 
that  anything  like  organisation  is,  as  a  rule,  unknown. 

"  Go  as  you  please,"  is  the  one  motto  for  all  under  fully- 
developed  capitalism,  and  the  object  of  each  individual 
employer  is  to  obtain  the  greatest  possible  outlet  and  the 
quickest  sale  for  his  own  goods,  quite  regardless  of  the 
interests  of  anybody  but  himself. 

A  third  antagonism  is  that  between  manual  and  machine 
labour,  already  referred  to  in  the  quotation  from  Eobert 
Owen.     When  the  labourers,  owing  to  an  improvement  in 


216         THE  ECONOMICS  OF  SOCIALISM 

business,  are  able  to  demand  and  get  better  rates  of  wages 
than  they  were  paid  before,  new  machines,  which  previously 
had  not  been  introduced,  are  brought  into  operation,  and 
thus  the  ingenuity  and  work  of  one  portion  of  the  working 
population  are  used  to  keep  another  portion  of  the  same 
population  in  economic  subjection. 

Again,  there  is  the  antagonism  previously  commented 
upon,  between  money  and  commodities.  Money  must  be 
obtained  by  the  sale  of  commodities.  With  liis  commodi- 
ties alone,  the  capitalist  cannot  buy  fresh  raw  materials, 
cannot  meet  his  bills,  cannot  pay  his  rent.  Therefore  the 
moment  any  hitch  occurs  in  disposing  of  his  goods,  this 
antagonism,  which  in  ordinary  times  escapes  notice,  starts 
up  and  stares  the  producer  in  the  face. 

Out  of  these  economic  antagonisms  there  arises  neces- 
sarily a  great  class  antagonism  between  the  employers  and 
the  wage-slaves,  between  the  bourgeoisie  and  the  prole- 
tariat. To  the  employers,  under  our  present  system,  the 
existence  of  an  unemployed  section  of  the  workers  is  a 
necessity.  The  ups  and  downs  of  trade  require  that  there 
should  be  constantly  on  the  market  a  set  of  workless  men 
and  women,  ready  to  compete  for  emplo}Tnent,  and  anxious 
in  good  times  to  accept  wages  below  what  otherwise  might 
be  obtained  by  those  in  employment,  and  eager  in  bad 
times  to  obtain  work  on  almost  any  terms  whatever. 

Another  antagonism  appears  between  the  labour  of  men 
and  women,  so  that  a  man's  foes,  economically  speaking, 
become  literally  they  of  his  own  household ;  children  being 
employed  where  it  is  at  all  possible,  in  order  still  furtlier  to 
lessen  the  necessity  of  employing  able-bodied  men,  and 
consequently  bringing  m  a  whole  family  to  earn  the  amount 
of  wages  which,  but  for  this  domestic  competition,  the 
man,  or  even  the  woman,  would  probably  earn  alone. 


INDUSTRIAL  CEISES  217 

The  economic  antagonisms  here  recited  are  the  real 
causes  of  the  successive  industrial  crises  we  are  discussing. 

Manufacturers  do  not  know,  as  a  rule,  what  their  neigh- 
bours are  doing.  For  instance,  news  reaches  a  house  from 
its  correspondent  in  India,  Australia,  or  China,  that  the 
goods  previously  encumbering  that  particular  market  have 
at  last  found  a  sale;  that  there  has  been  a  good  harvest,  a 
fine  silk  crop,  an  admirable  season  for  wool  or  cattle,  a 
splendid  return  from  jute,  or  opium,  or  indigo;  in  fact, 
that,  in  the  judgment  of  the  writer,  business  in  that  part 
of  the  world  will  not  only  be  better  for  the  moment,  but  tbat 
a  heavier  demand  will  certainly  follow.  Meanwhile,  he 
recommends  that  large  quantities  of  such  and  such  goods 
should  be  shipped  at  once,  so  that  the  rival  exporters  may 
not  step  in  first  after  the  troubling  of  the  pool  of  pros- 
perity. Similar  advices  reach  other  great  firms  from  their 
correspondents  about  the  same  time.  Then  the  wholesale 
exporters  give  orders  in  hot  haste;  the  manufacturers,  who 
have  probably  heard  of  the  improvement  themselves,  take 
heart,  and  cautiously  raise  prices.  They  feel  that  dulness 
and  short  time  and  depression  have  passed  away.  There 
is  lightness  in  the  commercial  air,  and  exhilaration  per- 
vades the  whole  atmosphere  of  business  operations.  Mills 
or  factories  begin  to  set  to  work  in  earnest  to  fulfil  the 
orders  which  pour  in  from  all  quarters.  More  "  hands  " 
are  needed  to  do  the  work.  The  "  over-population  "  which 
Malthusians  had  been  denouncing  is  absorbed  in  a  twin- 
kling—  to  enable  the  manufacturers  to  take  advantage  of 
the  "  good  times." 

The  good  news  spreads,  and  with  it  the  change  of  "  tone." 

Those  manufacturers  who  are  first  in  the  field  order  new 
and  improved  machinery,  which,  be  it  said  in  passing, 
increases  the  whole  available  supply  of  labour,  and  tends, 


218  THE  ECONOMICS  OF  SOCIALISM 

besides,  to  keep  wages  from  rising  excessively.  This,  for 
the  time  being,  gives  more  work  to  the  machinists  and 
iron-masters.  Their  prosperity  reacts  in  turn  upon  the 
miners  and  colliers.  Prices  rise  all  along  the  line;  the 
people  are  in  full  employment  at  good  pay,  for  they  have 
soon  demanded  a  rise  in  wages.  In  short,  the  manufac- 
turers are  in  haste  to  get  rich,  the  railways  get  full 
freights,  the  growers  of  raw  material  find  that  they  can,  at 
ruling  rates,  profitably  grow  more  of  the  special  staple  in 
which  they  are  interested.  Tliere  is  what,  in  American 
parlance,  might  be  called  a  universal  "  boom."  It  seems 
impossible  that  a  collapse  can  ever  come  again,  for  are  not 
all  interested  in  maintaining  this  general  interchange  of 
products?  The  working  classes,  in  particular,  hope  that 
at  last  permanent  employment  at  good  wages  is  assured  to 
them;  pauperism  falls  off,  and  the  reports  in  the  columns 
of  the  daily  newspapers  from  the  great  industrial  centres 
are  most  satisfactory.  The  very  whirl  of  business  prevents 
men  from  seeing  clearly  what  is  going  on  around  them. 

For  at  this  very  moment  the  highest  point  has  been 
reached.  Those  same  correspondents,  who  but  now  were  so 
jubilant,  send  home  doleful  tidings  to  the  effect  that  goods 
are  not  moving  off  so  fast  as  they  were,  and  counsel  pru- 
dence as  to  further  shipments.  In  the  home  market  also, 
the  rise  in  wages,  the  higher  rate  of  interest,  the  increase 
of  speculation  in  all  sorts  of  hopeless  enterprises,  or  invest- 
ments in  foreign  bonds,  combine  to  produce  a  check  at  the 
same  time.  It  is  found  that  a  portion  of  the  demand  has 
been  due  to  speculation  from  the  outset,  or  to  the  pur- 
chase of  our  own  goods  with  our  loaned  capital.  Further- 
more, the  rise  of  wages  has  driven  manufacturers  to  try  to 
get  the  better  of  their  neighbours  by  introducing  improved 


INDUSTRIAL  CEISES  219 

machinery,  and  thus  to  produce  more  at  a  lower  price  with 
fewer  hands. 

At  the  very  time,  therefore,  when  all  looks  most 
hopeful,  when  business  is  most  prosperous,  and  em- 
ployment is  most  brisk  —  just  at  that  instant  the  highest 
point  has  been  reached  in  the  progress  of  the  industrial 
cycle,  and  ere  long  the  downward  movement  commences. 
Suddenly,  then,  there  is  a  great  difficulty  found  in  dis- 
posing of  goods  at  a  profit.  The  home  and  foreign  markets 
are  alike  glutted.  Even  the  cheaper  raw  material  and 
improved  machinery  will  not  suffice  to  put  matters  on  a 
better  footing.  Rather,  those  manufacturers  who  have 
such  advantages  intensify  the  crisis  by  pouring  yet  more 
goods  at  a  lower  price  on  an  already  over-burdened  market. 
Hence  short  time  becomes  the  rule:  men  are  discharged 
wholesale  from  all  departments  of  industry.  There  are 
plenty  of  people  wanting  clothes,  food,  house-room ;  but  in 
order  to  give  them  employment,  and  thus  to  enable  them 
to  obtain  these  necessaries,  the  capitalist  class  must  be  able 
to  employ  them  at  a  profit,  and  such  profit  the  very  glut 
of  goods  in  the  market  prevents.  Hence  comes  the  renewal 
of  over-population  on  an  enormous  and  even  dangerous 
scale ;  whole  districts  are  reduced  to  the  very  lowest  level ; 
it  seems  as  if  such  misery  could  not  longer  endure. 

The  depression  spreads  to  every  department  as  pros- 
perity affected  every  interest.  Whence  the  first  check  comes 
matters  little,  sooner  or  later  all  are  more  or  less  injured, 
and  we  are  in  the  midst  of  one  of  those  ten-year  crises, 
which,  since  the  year  1825,  have  had  world-wide  effect. 
Such  industrial  crises,  which  are  sometimes  connected  with 
financial  upsets,  but  which  may  not  always  bring  about  the 
same  results,  have  occurred  every  ten  years  for  the  last 


220  THE  ECONOMICS  OF  SOCIALISM 

half-centur}'.  But  the  recurring  periods  have  been  short- 
ened, and  the  crisis  in  each  particular  trade  may  not  be 
absolutely  contemporaneous  with  that  in  others.  The 
destruction  they  involve  to  men  and  material  is  incon- 
ceivable. 

When  the  pressure  has  lasted  long  enough  for  the  over- 
production, as  it  is  called,  to  work  off,  then  the  renewed 
demand  begins,  and  the  wlieel  works  round  once  more. 
Again  the  workers  who  have  been  forced  into  the  work- 
house are  out  on  the  "  tramp  "  ;  again  the  unfortunate 
hands  who  have  "  clemmed  "  in  silence  and  sadness,  hoping 
for  better  times,  are  taken  back  to  labour  for  their  employ- 
er's advantage  and  profit,  only  to  be  thrust  down  into  deeper 
despair  at  the  next  stagnation,  which  is  as  sure  to  recur  as 
are  the  seasons.  Thus,  in  addition  to  all  the  uncertainty 
of  new  machines  and  inventions,  which  may  interfere  with 
his  scanty  wages  at  any  moment;  over  and  above  all  the 
evils  a  workman  has  to  suffer  from  the  revolutionary  basis 
of  modern  production  so  opposed  to  the  conservative  —  the 
too  conservative  —  methods  of  old  times ;  on  the  top  of 
such  never-ceasing  chances  and  changes  in  the  conditions 
of  his  daily  labour,  he  is  certain,  once  in  every  ten  years  at 
least,  to  suffer  from  a  congestion  in  the  labour  market, 
owing  to  no  fault  of  his  own,  which  may  throw  him  out  of 
his  former  comparative  comfort  into  the  lowest  abyss  of 
misery  and  despair. 

For  the  working-class  have  no  control  whatsoever  over 
the  disposal  of  the  goods  which  they  themselves  produce. 
They  are  not  consulted  as  to  whether  these  steps  should  be 
taken  or  that  course  abandoned.  Labour  has  no  say,  can- 
not compare  notes.  Tliere  is  socialisation  in  the  work- 
shop, in  the  factory,  in  the  mine,  on  the  farm ;  and  anarchy, 
absolute,  unrestrained  anarchy  in  the  exchange.     Yet  this, 


INDUSTRIAL  CEISES  221 

I  say  again,  is  the  organisation  of  labour  for  which  the 
labourers  are  asked  to  be  thankful ;  this  is  the  skilful  man- 
agement of  production  wliich  the  capitalist  class  and  their 
hangers-on  make  a  merit  of.  Wealth,  wealth,  ever  more 
wealth  here:  uncertainty,  depression,  starvation,  degrada- 
tion for  the  men,  women  and  children  whose  labour  alone 
gives  value  or  produces  goods.  The  sole  object  of  the  cap- 
italist class  being  to  obtain  surplus-value  by  extra  and 
unpaid  labour,  the  relative  over-population  produced  by 
machines,  and  the  alternating  series  of  inflation  and  depres- 
sion are  greatly  to  their  advantage.  They  are  able  to  make 
more  profit  in  a  shorter  time.  But  these  crises  tend  also 
to  crush  out  the  small  factories,  the  small  dealers,  the 
small  distributors,  and  the  small  handicraftsmen  more 
than  ever. 

Each  period  of  this  description  culminates  in  a  whole 
series  of  bankruptcies,  which,  as  a  rule,  means  that  the 
trade  is  driven  into  the  hands  of  larger  and  yet  larger  pro- 
ducers and  distributors.  Thus  the  uncertainty  of  exist- 
ence extends  far  even  above  the  mere  producer  himself, 
and  results  in  that  feverish  lust  for  gain  which  is  one  of 
the  worst  features  in  our  modern  society.  All  are  in  haste 
to  get  rich,  partly  because  they  hope  to  be  clear  of  the 
possibility  of  being  left  in  hopeless  penury  in  their  old  age. 
The  capitalist  system  renders  essential  tlie  economy  of  the 
means  of  production  in  each  separate  establishment;  but, 
on  the  other  hand,  this  is  effected  by  the  most  wholesale 
waste  of  the  physical  strength  of  the  producers  and  their 
means  of  production,  not  to  speak  of  the  innumerable 
parasites  engendered  by  the  luxury  it  develops.  Capitalist 
production,  to  repeat,  depends  upon  the  men  and  women 
who  work  being  deprived  of  the  means  of  production  and 
obliged  to  sell  themselves  on  the  market  for  what  is  little 


222  THE  ECONOMICS  OF  SOCIALISM 

more  than  a  bare  subsistence  wage.  But,  when  once  the 
system  is  established,  its  continuance  is  necessarily  ensured 
upon  an  ever-growing  scale,  until  the  producers  themselves 
combine  to  take  control  of  the  whole  means  of  production 
in  the  collective  interest. 

For  the  products  of  the  producer  continually  escape 
from  him  into  the  hands  of  the  class  opposed  to  him.  His 
power  of  labour  is  worked  up,  not  only  into  merchandise, 
but  into  capital  —  into  means  of  production  which  control 
him,  into  means  of  subsistence,  which  actually  buy  the 
worker  himself  body  and  soul.  He  is  the  slave  of  his  own 
production,  and  is  bought  with  his  own  necessaries  of  life, 
which  he  himself  furnishes  in  the  form  of  exchangeable 
commodities.  All  this  is  disguised  from  the  workers 
themselves  by  the  daily  or  weekly  sale  of  their  labour- 
force;  and  the  fiction  that  they  enter  upon  a  free  contract 
with  their  employers  induces  them  to  stint  themselves  per- 
manently by  serving  the  machines  of  another  and  hostile 
class.  Their  consumption  of  daily  necessaries  forces  them 
to  come  day  after  day  upon  the  market  in  order  to  sell 
themselves  afresh  to  their  employers  who  keep  them  thus 
in  economical  servitude.  The  relation  of  capitalist  and 
wage-Kl;;ve  is  day  by  day  perpetuated. 

"  But  higher  wages,"  say  some,  "  surely  this  would  in 
some  sort  remedy  the  miserable  position  you  describe. 
English  labourers  nowadays  are  at  any  rate  free  to  com- 
bine, the  voting  power  is  increasing  in  their  hands ;  cannot 
they  master  the  situation  in  that  way,  and  secure  for  them- 
selves some  comfort  and  security  ?  "  The  conditions  need 
stronger  measures,  valuable  as  combination  is  for  every 
purpose.  For  the  relative  over-population  which  occasions 
such  endless  misery  in  times  of  depression,  and  is  ever 
close  at  hand  in  the  flushest  times  of  trade,  is  directly  due 


INDUSTRIAL  CRISES  233 

to  the  control  by  the  capitalist  class  of  the  whole  process 
of  exchange,  the  increasing  employment  of  machines  owned 
by  that  class,  and  the  growing  proportion  of  constant  to 
variable  capital  in  every  business.  A  man  cannot  keep  his 
capital  without  increasing  it ;  accumulation  on  a  larger  and 
larger  scale  is  forced  upon  the  capitalist,  and  at  the  same 
time  the  increase  of  the  wage-earning  class  to  be  employed 
as  administering  to  luxury,  or  in  producing  more  and  more 
surplus-value,  continues.  The  payment  of  wages  itself 
presupposes  a  certain  amount  of  labour  given  for  nothing, 
which,  on  the  average  of  cases  in  England,  is  at  least  two- 
thirds  of  the  day's  work.  Wages,  in  fact,  as  already 
stated,  are  but  an  order  upon  a  fraction  of  the  value  of  the 
wage-earner's  production. 

Take  the  best  explanation  by  a  middle-class  economist 
of  the  phenomena  of  inflation  and  depression  which  has 
just  been  considered.  What  says  Mr.  John  Stuart  Mill? 
This: 

"  A  manufacturer  finding  a  slack  demand  for  his  com- 
modity forbears  to  employ  labourers  in  increasing  a  stock 
which  he  finds  it  difficult  to  dispose  of;  or  if  he  goes  on 
until  all  his  capital  is  locked  up  in  unsold  goods,  then  at 
least  he  must  of  necessity  pause  until  he  can  get  paid  for 
some  of  them.  But  no.  one  expects  either  of  these  states 
to  be  permanent;  if  he  did  he  would  at  the  first  oppor- 
tunity remove  his  capital  to  some  other  occupation  in  which 
it  would  still  continue  to  employ  labour.  The  capital 
remains  unemployed  for  a  time  during  which  the  labour- 
market  is  over-stocked,  and  wages  fall.  Afterwards  the 
demand  revives  and  perhaps  becomes  unusually  brisk, 
enabling  the  manufacturer  to  sell  his  commodity  even  faster 
than  he  can  produce  it;  his  whole  capital  is  then  brought 
into  complete  efiiciency,  and  if  he  is  able  he  borrows  capital 


224  THE  ECONOMICS  OF  SOCIALISM 

in  addition,  which  would  otherwise  have  gone  into  some 
other  employment.  At  such  time  wages,  in  his  particular 
occupation,  rise.  If  we  suppose  what  in  strictness  is  not 
absolutely  impossihle,  that  one  of  these  fits  of  briskness  or 
of  stagnation  should  affect  all  occupations  at  the  same  time, 
wages  altogether  miglit  undergo  a  rise  or  a  fall.  These, 
however,  are  but  temporary  fluctuations;  the  capital  now 
lying  idle  will  next  year  be  in  active  employment,  that 
which  is  this  year  unable  to  keep  up  with  the  demand  will 
in  its  turn  be  locked  up  in  crowded  warehouses,  and  wages 
in  these  several  departments  will  ebb  and  flow  accordingly ; 
but  nothing  can  permanently  alter  general  wages  except  an 
increase  or  diminution  of  capital  itself  (always  meaning 
by  the  term  the  funds  of  all  sorts  destined  for  the  payment 
of  labour),  compared  with  the  quantity  of  labour  offering 
itself  to  be  hired."  Again,  "Wages  depend,  then,  on  the 
proportion  between  the  number  of  the  labouring  population 
and  the  capital  or  other  funds  devoted  to  the  purchase  of 
labour;  we  will  say,  for  shortness,  tlie  capital.  If  the 
wages  are  higher  at  one  time  or  place  than  another,  if  the 
subsistence  and  comfort  of  the  hired  labourers  are  more 
ample,  it  is  for  no  other  reason  than  because  capital  bears 
a  greater  proportion  to  population.  It  is  not  the  absolute 
amount  of  accumulatiou  or  of  production  that  is  of  im- 
portance to  the  labouring  class ;  it  is  not  the  amount  even 
of  the  funds  destined  for  distribution  among  the  labourers ; 
it  is  the  proportion  between  those  funds  and  the  numbers 
among  whom  they  are  shared.  The  coudition  of  the  class 
can  be  bettered  in  no  other  way  than  by  altering  that 
proportion  to  tlieir  advantage ;  and  every  scheme  for  their 
benefit  which  does  not  proceed  on  this  as  its  foundation,  is, 
for  all  permanent  purposes,  a  delusion." 

Mr.  John  Stuart  Mill  was  a  Malthusian.     His  idea  was 


INDUSTRIAL  CRISES  225 

that  the  working  classes  ought  to  keep  down  their  families 
to  the  number  which  should  enable  them  to  get  each  a 
larger  amount  of  this  imaginary  wages-fund.  Strange  to 
say,  it  never  occurred  to  him  that  this  phenomenon  of  infla- 
tion and  depression  takes  place  in  countries  where  the 
population  is  stationary,  or  even  decreasing,  as  well  as  in 
lands  where  the  number  of  the  people  increases.  That 
there  has  been  no  want  of  capital  in  England  to  employ 
the  people,  is  apparent  to  the  most  casual  thinker.  Mani- 
festly, neither  the  over-population  theory  to  account  for 
the  miserable  wages  of  the  workers,  nor  the  abstinence  the- 
ory to  account  for  the  accumulation  of  capital,  will  hold 
water  for  a  moment.  What  abstinence  is  there  in  taking 
so  much  extra  labour  for  nothing,  and  then  merely  debat- 
ing whether  such  surplus-value  taken  from  the  labourer 
shall  be  used  to  build  larger  factories,  or  to  expend  in  lux- 
ury abroad?  In  either  case  the  enforced  abstinence  is  on 
the  part  of  the  labourer  who  gets  less  for  his  day's  work 
than  the  labour-value  he  provides.  The  capitalist  class 
takes  relatively  to  the  total  production  of  the  country  an 
ever-increasing  proportion  of  wealth  for  its  own  use.  Un- 
der our  system  of  unregulated  competition,  the  worker  on 
the  average  gains  nothing,  and  if  he  limits  his  family  as  a 
class  and  reduces  the  number  of  available  hands  —  a  thing 
practically  impossible  —  he  but  accelerates  the  introduc- 
tion of  new  machines,  and  in  due  time  the  re-creation  of  a 
relative  over-population. 

The  ordinary  explanation  of  these  troubles  is  empirical 
in  the  highest  degree.  There  has  been  over-production, 
and,  consequently,  the  markets  are  unable  to  absorb  the 
amount  of  commodities  thrown  upon  them.  But  why  there 
has  been  this  over-production;  why  the  markets,  which  but 
yesterday  were  exceedingly  active,  become  now  depressed 


226  THE  ECONOMICS  OF  SOCIALISM 

and  gloomy;  why  prices,  wliich  were  a  few  months,  or 
even  a  few  days  ago,  high  and  profitable,  should  thus  sud- 
denly become  low,  and  involve  producers  in  loss,  without 
any  change  having  taken  place  in  the  instruments  of  pro- 
duction—  these  are  questions  which  remain  wholly  unan- 
swered by  the  ordinary  economist. 

A  certain  school  of  writers,  not  so  much  in  vogue  now 
as  they  were  some  years  ago,  attribute  all  the  mischief 
to  monopoly  of  land  or  the  lack  of  free  trade  in  land. 
"  If,"  says  one  school,  "  land  could  be  transferred  from  one 
owner  to  another  as  easily  as  commodities,  then,"  so  it  is 
argued,  "  everybody  who  possessed  the  means  of  cultivat- 
ing the  land  being  easily  able  to  obtain  access  to  it,  there 
would  be  no  break  in  the  chain  of  connection  between  pro- 
duction and  consumption,  and  all  would  be  for  the  best." 
Unfortunately  for  this  view,  land,  in  the  sense  of  the  school 
of  Cobden,  as  now  represented  by  the  supporters  of  the 
"  National  Reform  Almanac  "  and  persons  of  their  views,  is 
perfectly  free  in  the  United  States  of  America,  and  as- 
suredly never  before  in  the  history  of  the  race  was  there 
a  greater  amount  of  undeveloped  land  to  be  free  with. 
Yet,  in  spite  of  this,  and  of  the  presence  of  one  of  the  most 
active  and  capable  populations  in  the  way  of  production  of 
wealth  ever  seen  on  the  planet,  America  has  suffered  per- 
haps more  severely  from  commercial  crises  during  the  last 
half-century  than  any  European  country. 

Our  Australian  colonies  have  afforded  strong  evidence 
on  the  same  side.  So  that  to-day  the  idea  that  free  trade 
in  land  will  have  any  serious  effect  in  preventing  commer- 
cial crises  has  faded  from  the  minds  of  all  save  those  who, 
having  once  taken  up  a  theory,  resolve  that  they  will  be 
wholly  indifferent  to  facts  which  inconveniently  refute  it. 

In  like  manner,  with  the  nationalisation  of  the  land, 


INDUSTEIAL  CRISES  227 

meaning  thereby  a  confiscation  of  rent  by  the  State  and 
the  conversion  of  all  holders  into  State  tenants.  In  India 
the  land  is  nationalised  in  precisely  that  way  over  the 
greater  part  of  the  British  territory,  and,  in  the  native 
States,  the  greater  part  of  taxation  is  raised  from  the  land. 
This,  of  course,  is  not  rent,  in  the  sense  in  which  rent  is 
understood  in  England;  but  it  is  State  nationalisation  of 
land,  and  the  cultivator  is  owner,  subject  only  to  the  pay- 
ment of  his  State  dues.  Of  course,  India  is  in  a  very  dif- 
ferent economic  condition  from  Western  Europe  or  Amer- 
ica ;  but  the  extreme  poverty  of  the  majority  of  the  popula- 
tion —  a  poverty  which  has  certainly  increased  and  is  in- 
creasing under  British  rule  and  nationalisation  of  the  land 
—  proves  conclusively  that  State  ownership  of  the  soil, 
apart  from  other  considerations,  constitutes  no  high-road 
to  national  wealth,  and  in  no  wise  interferes  with  those 
upsets  of  the  capitalist  system  from  which  India  has  suf- 
fered just  so  far  as  she  has  been  drawn  within  the  vortex  of 
international  exchange. 

Then,  again,  there  are  the  Protectionists,  who  aver  that 
if  each  country  strongly  protected  its  own  producers,  and 
thus  in  some  degree  rounded  itself  up  from  the  rest  of  the 
world,  crises  would  become  impossible,  and  depression  un- 
known. Once  more,  the  teachings  of  America,  France, 
Germany,  and  Victoria,  show  us  conclusively  that  protec- 
tion, even  when  pushed  to  an  exceptional  point,  is  quite 
powerless  to  arrest  these  terrible  industrial  convulsions, 
which  inflict  so  much  increase  of  misery  on  mankind. 

But  if  protection  is  no  remedy,  if  free  land  and  national- 
isation of  land  afford  no  relief,  if  every  country  which  en- 
ters into  and  forms  part  of  the  world-wide  system  of  pro- 
duction and  exchange  that  now  obtains,  is  subject  to  these 
same  convulsions,  no  matter  what  its  government,  and 


228  THE  ECONOMICS  OF  SOCIALISM 

without  regard  to  its  extent,  position,  or  climate,  if  all  this 
is  true  —  as  true  it  is  —  then  manifestly  the  Socialist  ex- 
planation of  these  purely  social  phenomena  holds  the  field. 

There  are  otlier  circumstances  lying  on  the  surface  of 
modern  industrial  arrangements,  which  tend  to  bring  about 
a  more  speedy  collapse,  when  the  time  is  ripe  for  a  break- 
down, and  render  a  renewal  of  confidence  slower  than 
would  have  been  the  case  in  previous  periods.  Thus,  for 
example,  the  greater  part  of  the  manufacturing  and  dis- 
tributing business  of  this  and  other  great  commercial  coun- 
tries is  done  upon  credit.  That  is  to  say,  men  who  are  en- 
gaged either  in  manufacture  or  trade  rely  upon  the  dis- 
count of  their  bills,  maturing  at  longer  or  shorter  periods, 
for  the  provision  of  the  greater  part  of  their  capital. 
These  bills  are  taken  at  varying  rates  of  discount,  accord- 
ing as  the  supply  of  loanable  capital  is  plentiful  or  the  re- 
verse. A  turnover  of  two  or  three  hundred  thousand 
pounds,  or  even  more,  in  the  year,  is  thus  often  worked 
upon  an  absolute  cash  capital  in  the  hands  of  the  manufac- 
turer or  the  merchant  not  exceeding  £10,000  or  £20,000. 
Now,  so  long  as  the  rate  of  discount  or  interest  ranges 
low,  say  from  2  or  2 14  to  41/2  or  5,  or  even  51/2  per  cent., 
those  who  are  carrying  on  business  under  these  conditions 
can  do  so  at  a  profit,  and  therefore  without  making  any  in- 
road upon  their  original  comparatively  small  capital  in 
proportion  to  the  business  which  they  do.  But  as  soon  as 
the  rate  goes  higher  than  this,  everybody  is  anxious  to 
realise  their  commodities  in  cash  in  order  to  meet  their 
bills  coming  due;  there  arises  a  fear  that  the  rate  will  go 
higher  and  higher  still,  and  every  one  of  these  weak  trad- 
ers is  in  fear  of  his  life. 

The  banks  became  very  careful  as  to  what  paper  they 
discount,   confidence   begins   to   be   shaken,   even   in   the 


INDUSTEIAL  CEISES  229 

standing  of  the  best  firms,  and  an  access  of  panic  seizes 
upon  the  whole  commercial  community.  Immediately 
there  arises  a  cry  for  what  are  called  "  the  means  of  ac- 
commodation," meaning  thereby  the  facility  to  exchange 
bills,  and  the  commodities  which  those  liills  represent,  for 
money,  or  money's  equivalent,  in  the  form  of  good  bank- 
notes. The  result  of  this  again  being  that  at  all  times  of 
pressure  we  hear  demands  made  for  an  expansion  of  cur- 
rency; and  a  variety  of  nostrums  are  propounded  which 
would,  it  is  hoped,  bridge  over  those  economic  antagonisms 
that  are  really  the  cause  of  the  whole  crisis.  Nevertheless, 
a  very  cursory  survey  of  the  crises  of  the  past  century 
would  show  that  they  have  taken  place  when  the  currency 
has  been  plentiful,  and  when  it  has  been  scarce;  when 
gold  has  had  a  high  relative  purchasing  power,  as  at  the 
present  time,  and  when  it  had  a  relatively  low  power,  as 
in  1857;  when  the  banking  system  of  a  country  has  been 
comparatively  sound,  as  in  France,  and  when  the  banking 
system  has  been  notoriously  unsound,  as  it  was  in  America 
in  1857. 

Leaving  aside  the  crisis  of  1815,  the  series  of  interna- 
tional crises  of  the  nineteenth  century  begins  with  the 
year  1825.  The  upward  course  of  business  which  had  com- 
menced in  the  year  1817  took  a  further  development  in 
1819,  when  the  Bank  of  England  resumed  specie  payments, 
and  a  succession  of  good  harvests  helped  on  the  period  of 
inflation.  Then  first  was  fully  felt  by  all  classes  the  great 
change  which  had  taken  place  in  the  methods  of  produc- 
tion in  England  since  1760.  In  every  direction  the  in- 
crease of  wealth  in  the  eight  years  prior  to  the  crisis  was 
something  phenomenal.  This  was  the  worst  period  in  our 
history  for  the  working-class  in  our  factory  districts.  Fac- 
tory laws  were  as  yet  unknown,   and  the  over-work  on 


230  THE  ECONOMICS  OF  SOCIALISM 

starvation  wages  is  something  horrible  to  read  of  even  now. 
But  the  middle-class  and  the  capitalists  waxed  exceed- 
ingly rich,  and  in  consequence  seemed  to  lose  those  bet- 
ter characteristics  which  had  previously  gained  them  wealth 
and  power. 

The  bubbles  of  the  previous  century  were  re-blown  in 
more  glittering  and  fantastic  shapes.  The  follies  of  1824 
and  1825  surpassed  every  previous  financial  folly.  Classes 
of  the  population  which  had  never  before  followed  the  will- 
o'-the-wisps  of  speculation  tumbled  over  one  another  in 
their  eagerness  to  put  salt  on  the  tails  of  these  Sittings 
of  the  financial  marsh.  It  was  high-day  and  holiday  for 
the  Dousterswivels  and  John  Laws,  for  unscrupulous 
schemers  and  half-insane  enthusiasts.  Everybody  specu- 
lated in  something :  not  only  the  world  of  business,  but  the 
entire  population  was  swept  along  in  the  craze  for  gam- 
bling. Old  and  young,  men  and  women,  rich  and  poor, 
noble  and  simple,  one  and  all  were  drawn  into  the  throng. 
Even  when  all  the  purely  absurd  and  swindling  projects  are 
eliminated,  and  only  those  are  taken  account  of  which  have 
a  reasonable  claim  to  solidity,  even  then  the  commitments 
entered  into  by  Great  Britain  are  upon  an  astonishing  scale 
—  a  scale  rather  suitable  to  the  end  than  to  the  beginning 
of  the  nineteenth  century,  and  certainly  more  fitly  repre- 
senting the  investments  of  twenty  years  than  of  two. 

The  most  ridiculous  speculations  were  entered  upon  by 
those  who  were  supposed  to  possess  the  shrewdest  brains  in 
the  city.  Money  seemed  to  be  rolling  in  in  huge  waves. 
The  time  was  thought  to  be  not  far  distant  when  all  who 
deserved  wealth  could  scarcely  fail  to  be  opulent,  and  a 
millennium  of  easily-earned  incomes  of  many  thousands  a 
year  had  commenced  for  the  really  worthy  of  the  popula- 
tion.    Just  at  the  very  height  of  confidence  and  foolish- 


INDUSTRIAL  CRISES  231 

ness,  the  crash  came.  In  six  weeks  seventy  provincial 
banks  failed,  and  commercial  houses  tumbled  down  one 
after  the  other.  Being  the  first  sweeping  panic  of  this 
kind  which  affected  people  throughout  the  country,  nobody 
quite  knew  what  to  be  at.  The  remarkable  sagacity,  of 
which  the  commercial  classes  are  supposed  to  possess  al- 
most a  monopoly,  was  entirely  wanting  at  the  critical  mo- 
ment. An  unprecedented  glut  of  commodities  intensified 
the   mischief   arising  from   a   sort  of   universal   despair. 

Thereupon,  Great  Britain  was  over-run  with  workless  peo- 
ple, and  as  Englishmen  had  not  then  learned  to  starve  in 
silence  and  quietude,  so  that  the  sleep  of  the  blunderers 
who  had  ruined  them  might  not  be  disturbed,  riots  and 
tumults  were  common  from  one  end  of  the  island  to  the 
other.  Imprisonments  and  shootings-down,  and  other  law- 
and-order  proceedings  of  course  followed,  and  the  workers 
were  persuaded  to  return  quietly  to  their  hovels  lest  a 
worse  fate  than  slow  starvation  should  befall  them.  By 
degrees  the  "  organisers  of  industry "  recovered  their 
senses;  but  it  was  some  time  before  the  effects  of  this  first 
great  international  crisis  passed  away. 

Foreign  countries,  even  then,  in  the  days  prior  to  rail- 
roads and  steam-vessels,  felt  the  injurious  influence  of  Eng- 
lish mismanagement.  English  goods  were  tumbled  at 
slaughter  prices  on  to  foreign  markets,  and  great  difficulties 
were  occasioned  in  financial  and  commercial  centres  which 
had  scarcely  participated  at  all  in  the  previous  inflation; 
whilst  the  great  cotton  gambling  in  the  United  States  left 
behind  it  a  legacy  of  trouble  and  uncertainty  on  the  other 
side  of  the  Atlantic. 

This  first  crisis,  however,  though  exhibiting  the  same 
features  on  a  smaller  scale  as  its  successors,  was  as  nothing 
to  those  which  followed.     After  a  period  of  recovery,  dur- 


233  THE  ECONOMICS  OF  SOCIALISM 

ing  which  the  banking  system  had  a  great  extension,  and 
speculation  and  gambling  burst  out  anew,  a  shock  sud- 
denly tumbled  down  the  whole  edifice  of  confidence.  This 
time  the  shake  came  from  the  other  side  of  the  Atlantic, 
and  in  1837  and  1839  again  were  seen  all  those  features  of 
glut,  panic,  incompetence,  and,  for  the  people,  destitution 
and  misery,  which  had  been  experienced  twelve  years 
before. 

In  this  crisis  the  United  States  suffered  even  more  than 
Great  Britain.  So  complete  was  the  collapse  that  bank- 
ruptcy seemed  to  become  the  rule  rather  than  the  exception. 
Needless  to  say,  the  people  who  suffered  most  were  pre- 
cisely those  who  had  no  control  whatever  over  the  manufac- 
turing, mercantile,  and  financial  machinery  to  which  they 
fell  victims.  But  the  international  character  of  the  crisis 
was  manifested  more  clearly  than  before.  A  rise  in  the 
Bank  rate  in  England  meant  a  restriction  of  accommoda- 
tion all  over  the  world,  and  people  were  wringing  their 
hands  in  hopelessness  at  a  recurrence  of  a  state  of  things 
which,  had  they  but  taken  into  consideration  the  lessons  of 
the  previous  crisis,  they  would  have  seen  to  be  inevitable,  so 
long  as  the  system  remained  as  it  was. 

This  crisis  of  1837  to  1839  was  the  last  under  the  old 
system  of  banking  in  England.  In  1844,  what  was  called 
the  Bank  Charter  Act  was  passed,  concerning  which  it  is 
sufficient  to  say  here  that  it  is  only  maintained  in  exist- 
ence because  everybody  in  the  world  of  finance  knows  per- 
fectly well  that  it  will  be  suspended  at  any  period  of  ex- 
ceptional difficulty. 

When  the  Bank  of  England  was  re-constituted  by  this 
Act  on  its  present  foundations  the  magnates  of  the  City  of 
London  were  foolish  enough  to  believe  that  henceforth 
such  troubles  as  those  of  the  two  previous  decades  would 


INDUSTEIAL  CRISES  233 

be  rendered  impossible.  They  little  understood  what  was 
coming.  One  of  the  great  difficulties  in  the  capitalist  sys- 
tem of  production,  as  has  been  incidentally  remarked  in 
a  previous  chapter,  is  to  regulate  and  harmonise  the  amount 
of  capital  which  shall  be  expended  on  works  of  permanent 
utility,  such  as  railways,  canals,  docks,  harbours,  and  the 
like  "  affairs  of  long  breath,"  as  the  French  call  them;  and 
the  amount  which  shall  be  disposed  of  or  allotted  to  what 
may  be  called  the  day-to-day  business. 

Now  the  period  from  1839  onwards  saw  the  great  de- 
velopment of  the  English  railway  system,  though  the  first 
railway  of  any  importance  in  this  country  had  been  opened 
between  Liverpool  and  Manchester  in  1830.  Everybody 
was  anxious  to  have  a  hand  in  this  new  method  of  getting 
rich  in  a  hurry,  by  providing  means  of  transporting  com- 
modities and  passengers  from  one  point  to  another.  The 
rush  to  make  railways  was  so  great,  that  had  one-half  the 
projects  formulated  been  carried  out,  this  island  would 
have  been  gridironed  from  one  end  to  the  other.  Even  as 
it  was,  what  was  being  done  quite  surpassed  the  necessi- 
ties of  the  period,  and  the  preposterous  premiums  to  which 
shares  advanced  in  enterprises  that  were  either  hopeless  in 
themselves,  or  were  not  then  at  all  ripe  for  being  carried 
out,  prepared  the  way  for  a  wholesome  breakdown. 

At  the  same  time,  the  introduction  of  free  trade  in  1846 
gave  another  impetus  to  trade  and  speculation.  The  year 
1847  saw  an  end  to  all  this  factitious  prosperity,  and  for 
the  third  time  within  thirty  years  Great  Britain  was  in  the 
throes  of  one  of  those  commercial  convulsions  which  speed- 
ily spread  to  other  centres.  Paris,  Amsterdam,  and  New 
York,  all  had  their  evil  period  of  mistrust  and  misfortune, 
as  a  consequence  of  the  crisis  in  industry  and  finance  at 
the  centre  of  international  capitalism.     Once  again  tens 


234  THE  ECONOMICS  OF  SOCIALISM 

of  thousands  of  workers  were  out  of  employment  and  starv- 
ing, and  the  famine  in  Ireland,  arising  largely  from  the 
shipment  of  food  to  England  to  pay  absentee  rents,  still 
further  aggravated  the  situation.  As  an  evidence  of  the 
worthlessness  of  City  calculations,  the  boasted  Bank  Act 
of  1844  proved  useless  at  the  first  touch  of  trial. 

Not  until  that  Act  was  suspended,  and  the  directors  were 
permitted  to  ride  rough-shod  over  the  law,  was  any  return 
of  confidence  and  commercial  stability  possible.  On  each 
occasion,  be  it  remarked,  the  financial  phenomena  consti- 
tute the  superficial  portion  of  the  crisis :  the  really  serious 
part  is  that  which  underlies  the  perturbation  of  the  stock 
markets.  It  is  the  constant  renewal  of  the  glut  of  com- 
modities, and  the  discharge  of  hands  consequent  upon  the 
incapacity  to  produce  more  at  a  profit  or  to  carry  out  great 
works  any  further,  that  constitute  the  really  dangerous 
and  permanently  unmanageable  features  of  the  whole  bus- 
iness. 

From  1847  we  pass  into  the  main  period  of  modern  de- 
velopment, and  between  that  date  and  1857  an  expansion 
of  trade,  of  colonisation,  and  of  gold  discovery  took  place, 
far  transcending  anything  that  had  ever  been  seen  before. 
Eailways,  steam-vessels,  telegraphs,  now  began  to  exercise 
their  full  influence  upon  modern  commerce,  and,  simul- 
taneously therewith,  the  expansion  of  the  great  machine 
industry  in  our  own  and  foreign  countries  brought  us  into 
the  period  of  fullest  development  of  the  capitalist  system. 
There  can  be  no  doubt  that  the  gold  discoveries  in  Cali- 
fornia and  Australia,  though  not  the  cause  of  the  tremen- 
dous inflation  which  1hen  followed,  greatly  tended  to  en- 
hance it,  and  to  widen  the  area  of  speculation  and  gam- 
bling. The  rise  of  prices  stimulated  production  and  en- 
couraged purchases.     America,  in  particular,  advanced  in 


INDUSTKIAL  CEISES  235 

prosperity  by  leaps  and  bounds,  longer  and  more  prodi- 
gious than  anything  previously  recorded. 

Her  inhabitants  took  care  to  let  all  the  world  know  of 
her  good  fortune,  and  men  persuaded  one  another  that,  with 
such  an  enormous  field  to  open  up  and  develop,  a  backset  of 
depression  could  never  come  again.  The  banking  system 
of  the  United  States  at  this  time  poured  fuel  on  the  fire. 
It  seemed  then,  to  the  most  far-sighted,  that  there  was  noth- 
ing but  continuous  prosperity  to  look  for.  But,  as  always 
happens  at  such  times,  it  was  just  when  everything  looked 
most  satisfactory  that  the  downfall  took  place.  Every- 
where warehouses  were  choked  with  goods  in  anticipation 
of  the  high  prices  which  everybody  felt  confident  would  be 
realised  by  their  sale.  Everywhere  preparations  were  be- 
ing made  to  still  further  pile  up  commodities  for  an  antici- 
pated good  market.  Suddenly  one  bank  stopped  pa}Tiient, 
and  then  a  suave  qui  pent  took  place,  unparalleled,  per- 
haps, in  the  mournful  history  of  these  crises.  Nothing 
could  be  sold.  Bills  previously  accounted  of  the  best  de- 
scription could  not  be  met.  All  the  gold  from  California 
and  Australia  was  powerless  to  check  the  universal  panic. 
From  one  end  of  the  United  States  to  the  other  people  did 
not  know  for  twenty-four  hours  whether  they  would  keep 
clear  of  the  Bankruptcy  Court. 

Very  speedily  bank  suspensions,  railway  defaults,  clos- 
ing of  factories,  unemployed  out  on  the  street,  gave  evi- 
dence that  all  classes  must  suffer  terribly  before  any  return 
of  confidence  allowed  the  machine  again  to  work  with  reg- 
ularity. England  on  this  occasion  likewise  suffered  ter- 
ribly. Workers  were  thrown  out  of  work  all  over  the  coun- 
try, the  fall  of  prices  rendering  it  quite  impossible  to  pro- 
duce at  a  profit,  no  matter  how  much  wages  might  be  cut 
do^\^l.     Yet,  as  I  have  said,  during  the  whole  of  this  period 


236  THE  ECONOMICS  OF  SOCIALISM 

gold  was  pouring  into  Europe  on  a  scale  quite  unknown  at 
any  previous  time.  The  year  1857  exhibited  more  clearly 
than  ever  before  the  fact  that  in  this  species  of  commercial 
and  financial  epidemic  no  quarantine  can  possibly  keep  out 
the  disease.  Beginning,  as  said,  in  America,  it  spread  with 
the  greatest  rapidity  to  the  United  Kingdom,  to  France, 
Germany,  Belgium,  Austria,  Italy,  as  well  as  in  due  time 
to  India,  China,  and  the  Australian  colonies.  Eegard- 
less  of  barriers  and  indifferent  to  governments,  this  crisis 
swept  on;  and  even  to-day  the  remembrance  of  the  year 
1857  and  the  anarchy  then  brought  about  in  financial  and 
industrial  affairs,  lingers  in  the  minds  of  all  who  passed 
through  it,  or  have  been  told  of  it  by  those  who  did. 

Nine  years  more,  and  yet  again  those  who  handle  the 
complicated  machinery  of  our  modern  industrial  and  com- 
mercial business  proved  themselves  incapable  of  reading 
the  signs  of  the  times.  Once  more,  therefore,  this  time 
again  beginning  in  England,  a  shock  was  given  to  credit  by 
the  fall  of  ^Messrs.  Overend,  Gurney,  and  Co.  in  1866,  the 
effects  of  which  would  have  been  much  worse  but  for  a  se- 
ries of  circumstances  that  gave  an  exceptional  impetus  to 
English  trade.  It  is  impossible  not  to  reflect  upon  the 
extraordinary  short-sightedness  of  all  this,  proving  again 
that  even  the  very  people  who  are  most  deeply  interested, 
owing  to  class  prejudice  or  the  occupations  of  business,  fail 
to  understand  what  is  going  on  around  them,  and  conse- 
quently are  wholly  incapable  of  making  preparations  for  a 
recurrence  of  a  similar  set  of  circumstances. 

The  crisis  of  1873  commenced  for  the  first  time  on  the 
Continent  of  Europe,  and,  strange  to  say,  began  in  the 
city  of  Vienna,  which  until  that  date  had  never  exercised 
any  important  influence  on  the  finance  of  Europe,  nor  in- 
deed has  it  done  so  since.     Commencing  in  the  month  of 


INDUSTRIAL  CEISES  337 

May,  1873,  the  crisis  worked  wholesale  destruction  in  Ger- 
many, in  the  United  States  of  America,  and  later  on  had  a 
most  prejudicial  influence  upon  English  prosperity ;  France, 
which  had  suffered  so  terribly  from  the  war  of  1870,  being 
the  country  of  Europe  which  escaped  with  least  loss.  I 
cannot  uow  give  any  account  of  the  huge  building  specula- 
tion in  Vienna  and  Berlin,  the  wild  fury  of  speculation  in 
banking  and  brokerage  banks  which  led  up  to  and  helped 
on  the  eventual  catastrophe.^  But  the  effects  were  such 
that  a  complete  reorganisation  of  finance  in  Germany  and 
Austria  followed,  which  did  not  prevent  the  most  whole- 
sale misery  amongst  the  working  population  at  the  time, 
nor  fail  to  check  legitimate  industrial  enterprise  under 
capitalist  production  up  to  the  year  1879. 

But  the  effects  of  this  crisis  were  exliibited  in  their  most 
acute  form,  and  could  be  traced  more  clearly  than  else- 
where, in  the  great  Republic  on  the  other  side  of  the  At- 
lantic. The  great  extension  of  railroads  which  had  taken 
place  after  the  Civil  War,  the  rush  of  European  capital 
to  obtain  a  share  in  the  rising  prosperity  of  this  magnifi- 
cent territory,  the  steady  extension  along  the  lines  of  rail- 
ways, as  well  as  through  the  valleys  of  the  great  rivers, 
the  cultivation  of  all  sorts  of  produce  —  all  these,  together 
had  produced  an  appearance  of  prosperity  which,  extend- 
ing to  the  mountain  regions  of  the  West,  and  affecting  the 
till  then  somewhat  distressed  districts  of  the  South,  built 
up  a  display  of  wealth  which  dazzled  all  beholders. 

With  the  crisis  of  1873  all  this  real  as  well  as  apparent 
prosperity  seemed  to  fade  away  like  a  mirage,  and  never  was 
the  glut  of  all  commodities  more  clearly  exhibited  as  the 

1  Those  who  wish  for  further  information  on  the  auhject  may 
find  it  more  fully  treated  in  my  "  Commercial  Crises  of  the 
Nineteenth  Century." 


238  THE  ECONOMICS  OF  SOCIALISM 

cause  of  crisis  following  upon  economic  antagonism,  than  at 
this  time.  True,  in  1857,  also,  good  harvests  on  both  sides 
of  the  Atlantic,  cumbering  all  the  storehouses  with  grain, 
produced  that  terrible  irony  of  men  and  women  thrown 
workless  on  the  streets,  and  starving,  because  food  was  too 
cheap  and  too  plentiful  for  them  to  obtain  it.  But  in  1873 
and  1874  in  the  United  States  things  looked  still  worse. 
With  the  greatest  power  to  produce  wealth  that  the  world 
had  ever  seen,  and  more  favourable  conditions  in  every  re- 
spect to  produce  it  in,  between  three  and  four  millions  of 
workless  and  foodless  men  paraded  as  hopeless  tramps 
throughout  the  Republic. 

To  pass  through  the  principal  industrial  districts  before 
the  crisis  and  to  revisit  the  same  towns  during  it  was  indeed 
a  lesson  in  the  anarchy  of  capitalism.  When  all  was  going 
well,  it  seemed  impossible  for  men  to  work  enough;  wages 
were  high,  goods  were  being  thrown  upon  the  market  with 
unexampled  rapidity.  Furnaces,  rolling  mills,  cotton, 
wool,  and  silk  factories  were  all  running  at  full  speed.  The 
working  population,  as  well  as  the  middle  classes,  seemed 
to  think  that  there  could  be  no  end,  as  before,  to  this  period 
of  "  boom."  A  few  months  later,  what  a  change !  Busy 
cities  comparatively  deserted;  works  at  a  stand-still;  men, 
women,  and  children  looking  round  hopelessly  —  and  there 
is  no  harder  place  in  the  world  than  America  for  the  poor 
—  for  that  employment  which  seemed  little  likely  to  come. 
Yet  at  this  very  time  all  the  magazines  were  bursting  with 
food-stuffs,  and  the  store-houses  were  literally  choked  with 
useful  articles  that  the  people  were  not  allowed  to  turn  to 
useful  purposes. 

A  similar  state  of  things  a  little  later  was  to  be  found 
in  England  itself,  where,  though  the  crisis,  as  already  said, 


INDUSTRIAL  CRISES  239 

was  not  felt  so  speedily,  bad  times  made  their  appearance 
all  too  soon. 

After  another  prolonged  period  of  depression,  involving 
an  amount  of  unnecessary  suffering,  merely  by  reason  of 
the  incapacity  of  organised  society  to  control  the  greatest 
means  of  making  wealth  that  the  world  has  ever  seen, 
another  upward  period  began.  But  this  again  was  but  tem- 
porary. The  next  crisis  had  its  origin  in  France  and  was 
connected  with  the  downfall  of  the  Union  Generale.  In 
this  case  the  effect  was  not  so  immediately  to  be  observed 
as  in  either  of  the  preceding  instances ;  it  was  rather  a  slow, 
grinding  depression,  than  an  immediate  and  sudden  col- 
lapse. Nevertheless,  though  not  so  marked  in  its  features, 
every  country  was  affected;  and  in  England  from  1883  to 
1887,  or  even  1888,  there  was  a  period  of  worklessness  for 
huge  masses  of  the  people,  and  restricted  business  for  the 
manufacturing,  mercantile,  and  financial  classes,  which 
equalled  almost  anything  that  had  gone  before.  Once 
more,  in  every  country  where  capitalism  prevailed,  the 
difficulty  in  disposing  of  the  accumulation  of  products  in 
every  department  resulted  in  widespread  distress  for  the 
workers  of  all  civilised  nations. 

Too  much  food  for  the  people  to  have  withal  to  eat;  too 
much  of  clothing  for  people  to  be  clothed;  too  much  fuel 
to  provide  them  with  warmth.  Such  is  the  anarchy  of  our 
order  of  to-day. 

The  recovery  commenced,  as  I  say,  in  1887,  and  was 
very  short-lived.  This,  indeed,  is  a  noteworthy  feature  of 
all  these  great  crises.  They  follow  one  another  at  ever- 
shortening  distances,  and  last  longer  each  time  that  they 
come.  Three  years  of  good  trade,  chiefly  due  to  the  ex- 
ceptional development  of  South  America,  saw  the  civilised 
world  involved  in  another  and  terrible  depression.     The 


240  THE  ECONOMICS  OF  SOCIALISM 

great  Baring  crisis  of  1890  is  still  fresh  in  the  memory  of 
all.  First  felt  terribly  in  Great  Britain,  and  then  spread- 
ing with  tremendous  rapidity  to  France,  Germany,  and 
Austria,  it  slowly  worked  its  way  to  America  in  the  west, 
and  to  Australia  on  the  other  side  of  the  world.  It  is  not 
too  much  to  say  that  the  five  years  1890  to  1895  were  in 
England  a  period  of  slow,  persistent  stagnation,  during 
which  the  numbers  of  the  unemployed  and  partially  em- 
ployed exceeded  those  of  which  there  is  any  record  what'- 
ever. 

This  lack  of  work  arose,  as  usual,  not  from  de- 
ficiency of  production,  or  from  abnormally  high  prices,  but 
from  over-supply  of  the  very  tilings  required  for  human 
subsistence,  and  the  low  prices  at  which  they  could  be  ob- 
tained. In  America  matters  were  worse  still.  The  ter- 
rible crisis  of  1893  surpassed  even  that  of  twenty  years  be- 
fore in  the  injury  which  it  did  to  the  working-people. 
Wages  fell  in  every  department  of  trade,  and  the  men  and 
women  competing  for  employment  upon  a  market  already 
overstocked  found  themselves  encountered  in  their  own 
country  by  swarms  of  Italians  and  Hungarians,  not  only 
accustomed  to  a  lower  standard  of  life  than  themselves, 
but  also,  from  their  ignorance  of  the  language,  virtually 
mere  slave-driven  starvelings. 

The  mischiefs  below  reflected  themselves  above  in  the 
collapse  of  one  bank  after  another,  in  a  succession  of  bank- 
ruptcies almost  unparalleled,  and  in  one  great  railway 
after  another  being  thrown  into  the  Eeceiver's  hands. 
Matters  must  indeed  have  reached  an  unprecedented  pitch 
when  railway  companies  of  the  standing  of  the  New  York 
Central  and  the  Michigan  Central,  not  to  speak  of  private 
capitalists  of  enormous  wealth,  were  driven  to  borrow 
money  on  the  English  market  at  rates  of  interest  which 


INDUSTKIAL  CRISES  241 

far  exceeded  anything  before  heard  of  on  similar  security. 

In  Australia,  at  a  slightly  later  date,  the  same  thing  oc- 
curred on  an  even  greater  scale,  regard  being  had  to  the 
disparity  in  population.  It  may  be  said  that  only  three 
banks  in  all  the  Australian  colonies  kept  their  heads  above 
water.  In  Melbourne,  the  best  of  real  estate  in  the  city 
itself  was  almost  unsaleable.  Sheep-runs,  which  shortly 
before  liad  been  valued  at  hundreds  of  thousands  of  pounds, 
could  not  find  purchasers  at  any  price.  With  millions  of 
acres  of  good  land  all  around  them,  with  one  of  the  finest 
climates  in  the  world  to  enjoy,  the  problem  of  the  unem- 
ployed became  as  pressing  as,  and  even  more  dangerous,  in 
Melbourne,  Sydney,  and  Adelaide,  than  it  had  been  in  Eng- 
land. What  is  remarkable  in  this  most  recent  group  of 
crises,  commencing  with  1890,  has  been  the  character  of 
the  men  immediately  involved  in  the  ruin  and  devasta- 
tion brought  about.  In  America,  in  Great  Britain,  in 
Australia,  on  the  Continent  of  Europe,  it  has  been  the  very 
pick  of  capitalist  society,  the  highest  names  in  the  commer- 
cial and  even  the  aristocratic  world,  that  have  utterly  failed 
to  show  any  capacity  whatever  to  deal  with  what  they  are 
pleased  to  call  "  tlieir  own  businesses." 

Leaving  aside  cases  of  individual  rascality,  which  have 
really  become  too  numerous  to  consider  as  in  any  way 
exceptional,  it  is  clear  that  the  transfer  now  completed  of 
the  control  of  adventure  and  industry  from  the  mercantile 
to  the  financial  class  tends  to  intensify  such  crises  as  those 
which  now  so  constantly  afflict  the  industrial  community. 
The  mercantile  class  could,  and  did,  enter  upon  a  business 
which  might  extend  over  many  years  with  its  own  capital, 
and  was  prepared  to  take  success  or  failure  as  it  might 
come.  In  their  best  period,  they  looked  far  ahead,  and 
made  their  calculations  with  care  and  ability.     The  finan- 


242  THE  ECONOMICS  OF  SOCIALISM 

cial  class,  on  the  other  hand,  necessarily  restricts  its  pur- 
view. Its  one  object  is,  not  the  gain  of  success  in  the 
future,  but  realisation,  by  sale  to  the  public,  of  immediate 
profit  in  the  present.  Consequently,  the  capitalist  class  of 
to-day,  as  represented  in  its  fullest  development,  is  the  most 
short-sighted  and  incompetent  dominant  class,  from  the 
point  of  view  of  the  community,  of  which  history  shows  any 
record  whatever. 

But  while  these  crises  pass  —  pass  —  pass  —  and  come 
again,  unknown  to  them  and  unconsciously  organised  by 
them,  the  corrective  is  developing  out  of  the  conditions  of 
the  time.  Each  successive  crisis  now  tends  to  the  still  fur- 
ther establishment  of  industrial  monopoly.  The  smaller 
organisms  in  every  department  of  trade  are  being  relent- 
lessly crushed  out.  Trusts,  "  combines,"  "  corners,"  now 
pervade  every  department  of  production,  and  the  monopo- 
lies of  the  twentieth  century  seem  likely  to  surpass  thoi^e 
kingly  monopolies  of  the  sixteenth  century  against  which 
our  ancestors  rose  in  arms. 

Already  the  form  of  industrial  and  commercial  crises 
underwent  in  consequence  considerable  modification  at  the 
end  of  the  nineteenth  and  the  beginning  of  the  twentieth 
century.  Capitalism,  by  the  growth  of  Trusts,  Combines, 
Cartels,  Trade  Agreements  and  Manufacturers'  Under- 
standings referred  to,  began  to  co-ordinate  its  own  anar- 
chical methods  of  helter-skelter  production  and  realisation. 
A  steady  reduction  in  the  number  of  great  banking  institu- 
tions and  a  more  vigilant  survey  of  the  scope  of  the  world- 
market  in  each  branch  of  industry  tended  in  the  same  direc- 
tion. 

As  a  result,  the  approach  of  over-production  and  glut 
of  commodities  in  each  line  of  business  was  taken  ac- 
count of  systematically  and  dealt  with  by  means  of  restric- 


INDUSTRIAL  CRISES  343 

tion  of  banking  credits,  gradual  rises  in  the  rate  of  discount 
all  along  the  line,  reduction  of  output,  with  consequent 
"  short  time  "  for  the  wage-earners  in  the  different  indus- 
tries, and  a  recognition  of  the  existence  of  a  slackening  de- 
mand for  commodities  with  a  lower  range  of  prices.  In 
this  way  headlong  competition  was  brought  under  control 
to  a  considerable  extent.  Industrial  and  commercial  crises, 
after  a  period  of  prosperity,  were  more  and  more  taking  the 
shape  of  a  prolonged  dry-rot  in  trade,  with  a  steady  margin 
of  underpaid  and  unemployed  wage-earners ;  instead  of  ap- 
pearing in  the  shape  of  such  periodical  crashes  of  credit 
and  breakdown  of  shaky  realisations  due  to  over-produc- 
tion all  round,  which  have  been  briefly  summarised  above. 
In  Great  Britain,  though  Trusts  and  Trade  monopolies 
have  not  advanced  so  far  as  in  the  United  States  and  Ger- 
many, steps  were  taken  by  the  industrial  chiefs  to  deal  in 
this  way  with  the  inevitable  outcome  of  competitive  produc- 
tion. The  effect  upon  the  working-class  of  cities  and  towns 
dependent  wholly  upon  one  staple  industry,  of  this  par- 
tially organised  shrinkage  of  production  and  employment, 
was  deplorable.  A  distinct  lowering  of  the  standard  of 
physical  and  intellectual  life  was  observable.  An  atmos- 
phere of  gloom  pervaded  the  population  during  these  pe- 
riods of  prolonged  "  bad  trade,"  whose  duration  extended, 
with  increasing  length,  at  each  renewal  of  depression.  So 
much  so,  that  the  years  of  slack  business  were  exceeding 
those  of  acti\dty  in  several  centres  and  the  fringe  of  unem- 
ployment though  smaller  in  dimensions  was  becoming  al- 
most permanent,  this  fringe  of  unemploj'ment  being  a 
necessity  of  the  continuous  functioning  of  the  entire  cap- 
italist system. 


CHAPTER  X 

OBJECTIONS   TO   THE   LABOUR  THEORY  OF  VALUE 

It  was  inevitable  that,  when  Marx's  theories  are  being 
accepted  by  leading  economists  all  over  Europe,  and  sev- 
eral Governments  have  had  Marxists  as  their  Prime  Min- 
isters and  Ministers,  great  eft'orts  should  be  made  to  show 
that  these  opinions  are  erroneous.  The  capitalists,  their 
bourgeoisie  and  their  economists,  are  still  not  ready  to  sur- 
render, without  a  struggle,  either  in  theory  or  in  practice. 

That  is  natural.  A  class  which  nowadays  dominates  so 
complex  a  society  as  ours,  which  has  produced  so  many  men 
of  genius  in  the  world  of  science,  of  art  and  of  letters; 
which  believes  that  its  function  as  an  organising  and  ad- 
ministrative body  is  essential  to  the  continued  existence 
and  progress  of  society  as  a  whole;  which  regards  itself  as 
engaged  in  steadily  improving  the  general  status  of  the 
human  race;  which,  besides,  has  furnished  even  the  theo- 
rists and  the  leaders  of  the  new  Labour  movement,  from 
among  its  own  learned  men,  may  be  forgiven  when  its  mem- 
bers refuse  to  recognise  that,  like  tlie  land  and  slave  own- 
ers and  the  feudal  barons  and  serf -lords  of  old  —  who  also 
produced  great  men  in  their  day  —  the  period  of  its  own 
downfall  is  rapidly  approaching.  And  the  synthesis  of 
Marx's  analysis  involves  nothing  short  of  such  a  downfall 
for  them.  Hence  it  is  that  they,  with  their  economists, 
carry  on  the  conflict  not  only  in  politics,  in  social  affairs,  or, 
when  necessary,  on  the  field  of  physical  conflict,  but  like- 
wise in  the  department  of  thought  and  reason. 

244 


OBJECTIONS  TO  LABOUR  THEORY        245 

Thus  the  effort  has  been  made  to  prove  that  the  entire 
work  done  by  Marx  and  his  school  is  really  of  no  impor- 
tance: a  mere  will-o'-the-wisp,  certain  to  lead  the  ignorant 
and  credulous  into  the  bog  of  miscomprehension  and  illu- 
sion. We  are  told  plainly,  therefore,  that,  under  the  free 
competitive  system  of  capitalist  production  for  exchange, 
the  relative  value  of  commodities  is  not  determined,  on  the 
average,  by  the  quantity  of  social  labour  embodied  in  them. 
Evidence  to  that  effect  is  furnished  by  pointing  to  natural 
objects,  or  raw  materials,  which,  when  brought  into  the 
sphere  of  capitalist  production  by  the  expenditure  of  a 
given  quantity  of  labour-power,  are  of  greater  value  than 
other  natural  objects,  or  raw  materials,  of  a  somewhat  sim- 
ilar character,  which  are  made  available  in  the  same  sphere 
of  capitalist  production,  by  the  expenditure  of  an  equal, 
or  only  very  slightly  less,  expenditure  of  labour-power. 

Therefore,  the  raw  material  of  superior  quality,  created 
by  nature  herself,  has  a  higher  relative  exchange  of  value, 
before  and  after  it  is  brought  forward  on  to  the  market, 
than  the  material  of  inferior  quality  belonging  to  the  same 
class  of  natural  objects.  Consequently,  the  private  owner 
of  the  superior  or  exceptional  raw  material  obtains  in  ex- 
change with  other  commodities  a  higher  rate  of  relative 
value,  or  a  higher  price,  than  the  private  owner  of  the  in- 
ferior raw  material,  according  to  the  social  estimate  of  the 
time.  That  this  is,  in  practice,  the  truth  cannot  be  dis- 
puted. 

But  the  process  of  capitalist  production  has  only  begun, 
when  raw  materials  grown  or  furnished  by  nature,  no  mat- 
ter what  their  respective  qualities  may  be,  are  taken  into 
the  workshop,  the  factory,  the  rolling-mills,  &c.,  in  order 
to  convert  them  into  finished  commodities,  by  the  embodi- 
ment of  simple,  abstract  human  labour  in  them.     These 


246  THE  ECONOMICS  OF  SOCIALISM 

raw  materials  of  different  qualities  and  varying  values, 
that  is  to  say,  convey  no  more  value  to  the  finished  com- 
modities, when  produced,  appropriated  and  exchanged, 
than  that  which  they  possessed  at  the  start.  They  form 
part  of  the  original  constant  capital,  the  value  of  which 
neither  gains  nor  loses  during  the  process  of  production 
and  exchange. 

Such  alteration  of  form  without  change  of  value  involves 
the  appropriation  of  no  surplus-value,  nor,  therefore,  profit 
for  the  owner,  of  the  capital,  either  in  the  shape  of  sur- 
plus commodities  or  in  the  shape  of  cash,  upon  the  realisa- 
tion of  all  the  commodities  so  produced,  by  sale  for  money. 
The  origin  of  surplus  value  remains  where  it  was  before  — 
in  the  amount  of  unpaid  labour  embodied  in  commodities, 
for  which  no  remuneration  whatever  has  been  given  in  the 
wages  paid  by  the  capitalist  during  the  period  of  produc- 
tion. This  surplus-value  he  appropriates  first  in  com- 
modities and  then  in  money. 

Yet  we  are  told  that  the  variations  in  the  quality  and 
value  of  natural  objects,  before  they  enter  into  the  sphere 
of  production  and  exchange  at  all,  destroy  the  whole  theory 
of  abstract,  social,  labour  value  as  measuring  the  relative 
value  in  exchange  of  commodities  which  can  be  indefi- 
nitely reproduced !  There  is  no  need  to  labour  this  state- 
ment and  its  refutation  any  farther. 

But,  apart  from  this  contention,  there  are  other  points 
which  are  insisted  upon  as  invalidating  the  theory.  First, 
that  the  concentration  of  capital  in  larger  and  larger 
masses,  for  the  purposes  of  production,  which  Marx  pre- 
dicted, is  not  being  borne  out  by  the  facts,  as  recorded 
in  the  countries  which  are  most  fully  developed  econom- 
ically. In  view  of  what  is  going  on  at  the  present  time, 
it  is  scarcely  necessary  to  consider  this  argument.     The 


OBJECTIONS  TO  LABOUR  THEOEY        247 

chief  feature  of  economic  progress,  throughout  the  capital- 
ist world  to-day,  is  the  growth  of  great  Trusts,  Combines 
and  Monopolies,  in  every  department  of  production  and 
distribution,  with  a  view  to  minimising  waste,  curtailing 
unnecessary  expenditure  and  limiting  cut-throat  competi- 
tion and  "  over-production "  by  capitalists  in  the  same 
branches  of  trade.  Thus  the  manifest  tendency  of  capital 
towards  concentration  in  greater  and  greater  masses  is  obvi- 
ous. 

A  few  critics  have  been  misled  by  inaccurate  statistics 
of  individual  shareholders  in  Limited  Companies,  and 
have  persuaded  themselves,  in  consequence,  that  wealth  is 
much  more  widely  distributed  than  it  is.  Edouard  Bern- 
stein, in  his  "  revisionist "  period,  was  one  of  those  who 
made  this  mistake.  But,  so  long  ago  as  1913,  in  two  lec- 
tures delivered  at  Buda-Pesth,  he  frankly  and  completely 
abandoned  his  anti-Marxist  views.  Clearly,  also,  even  if 
Marx's  anticipations  had  been  falsified,  instead  of  being 
verified,  this  would  not  have  affected  the  truth  of  his  ex- 
change theory  in  itself. 

Secondly,  it  has  been  argued  that,  though  the  combina- 
tion of  large  capitals  may  have  been  going  on,  the  inde- 
pendent bourgeoisie  have  not  been  crushed  out  by  the  com- 
petition of  the  larger  capitals  embarked  in  industry,  either 
in  the  productive  or  in  the  distributive  sphere.  But  this 
again  is  simply  a  mistake  as  to  facts.  What  has  actually 
happened  is  this:  That  while  the  larger  bourgeoisie  have 
been  displaced  or  absorbed  by  the  still  larger  combinations 
for  production  and  distribution,  in  some  directions,  the 
small  shop-keepers  have  been  simultaneously  increasing. 
But  these  small  retailers,  who  may  have  increased  with  the 
increasing  population,  are  merely  petty  distributors,  at- 
tendants upon  the  wage-earners,  part  of  the  hand-to-mouth 


248  THE  ECONOMICS  OF  SOCIALISM 

proletariat  themselves,  toiling  excessively  long  hours  to  se- 
cure subsistence  by  their  "  profits,"  and  not  a  Third  Estate, 
a  powerful  middle  class,  or  bourgeoisie,  at  all.  The  dilTer- 
ence  between  these  poverty-stricken  purveyors  to  the  needs 
of  the  worker  and  the  old  well-to-do  and  independent  shop- 
keeping  class  is  too  marked  to  be  honestly  overlooked  even 
by  the  most  prejudiced  critic. 

In  one  direction  only  is  there  an  apparent  exception  to 
this  general  rule  of  the  concentration  of  capital,  the  con- 
tinued increase  in  the  scale  of  industrial  production  and 
the  gradual  elimination  of  the  producer  on  a  small  scale. 
This  is  in  relation  to  the  land.  It  seems  now  well  estab- 
lished that  the  general  tendency,  even  in  countries  where 
there  is  still  a  vast  "  frontier  "  open  to  occupation  and  till- 
age, is  not  towards  the  success  of  huge  factory  farms  of 
from  10,000  to  40,000  acres  in  one  block,  notwithstanding 
the  great  improvement  in  machinery  and  scientific  manur- 
ing, skilled  dairy-farming  and  the  like.  Eelatively  small 
farming,  of  from  200  to  500  acres  in  one  holding,  seems 
to  be  on  the  increase :  the  unit  of  profitable  farming  being 
lower  apparently  under  such  circumstances  than  might 
have  been   supposed  beforehand.  , 

Here  the  law  of  the  concentration  and  enlargement  of 
capital  —  where  co-operation  has  not  been  introduced  — 
comes  so  far  on  the  next  plane.  The  cultivators,  though 
nominally  independent  farmers,  find  themselves  at  the 
mercy  of,  and  in  effect  working  for,  the  great  railway  com- 
panies, elevator  companies,  creamery  companies,  canning 
combinations,  banking  monopolies,  and  the  like.  But  the 
actual  concentration  of  capital  for  the  capitalists  and 
against  the  farmers  goes  on  none  the  less  rapidly.  It  is 
only  the  concentration  of  capital  on  actual  land-cultiva- 
tion which  has  not  proceeded  so  fast.     This  is  specially  no- 


OBJECTIONS  TO  LABOUR  THEORY        249 

ticeabie  in  the  United  States  and  Canada.  So  crushing,  in 
fact,  has  the  tyranny  of  capital  in  these  secondary  depart- 
ments become,  in  many  districts  of  these  two  countries,  that 
the  farmers  themselves,  hitherto  the  most  conservative 
class  in  the  world,  and  the  least  inclined  to  political  action 
in  their  own  interest,  have  been  literally  forced  into  polit- 
ical revolt,  in  order  to  protect  their  economic  status  against 
the  combination  of  profiteers  who  dominated  not  only  the 
distributive  and  financial  but  the  political  sphere. 

Where  these  farmers  have  succeeded  in  making  their  po- 
litical power  felt  they  have  organised  collectivist,  coopera- 
tive and  limited  Socialist  agencies  to  prevent  exploitation 
by  capital,  and  to  extend  improvement  by  State  encourage- 
ment. Here,  as  elsewhere,  therefore,  the  general  movement 
has  been  towards  the  control  and  ownership  of  concentrated 
capital  and  monopoly  in  collective  interest,  and  in  the 
United  States  and  Canada  the  farmers,  though  not  as  yet 
Social-Democrats,  have  been  wise  enough  to  use  political 
action  successfully  towards  collectivist  ends. 

Thirdly,  attempts  have  been  made  of  late  to  show  that 
the  work  of  intelligent  human  beings,  in  the  shape  of  so- 
cial service,  organisation  of  labour  in  factories,  in  work- 
shops, on  the  land,  and  so  on  adds  to  the  value  of  commodi- 
ties in  exchange,  and  thus  modifies  the  basis  of  the  labour- 
value  theory.  This  claim  is,  of  course,  not  a  modification 
but  a  direct  contradiction  of  the  whole  labour  theory  of 
value. 

But  what  does  a  man  do  who  introduces,  let  us  say,  a  bet- 
ter system  of  organisation  of  labour  and  management  into 
a  furniture  factory? 

This  organiser  enables  the  employer  to  produce  a 
greater  quantity  of  tal)les,  chairs,  cbests  of  drawers,  desks, 
and  the   like   with   the   same   amount  of  human   labour 


250  THE  ECONOMICS  OF  SOCIALISM 

which  he  used  before.  There  are  more  useful  arti- 
cles produced,  that  is  to  say,  by  the  same  quantity 
of  labour.  The  effect  is  the  same  as  that  resulting  from 
the  introduction  of  an  improved  machine  into  the  industry. 
There  is,  obviously,  in  both  cases,  less,  not  more,  human 
labour  embodied  in  the  different  or  separate  pieces  of  fur- 
niture produced,  than  there  was  before  the  work  in  the 
factory  was  re-organised. 

What  does  this  mean?  That  the  furniture  manufac- 
turer can  afford  to  exchange  his  commodities,  or  realise 
them  in  gold,  for  a  lower,  not  for  a  higher,  exchange  value, 
or  price,  than  he  did  before  his  "  hands  "  were  taught  how 
to  economise  their  labour-power,  because,  owing  to  the  bet- 
ter organisation,  more  goods  are  produced  with  the  same 
expenditure  of  labour-power.  Thus  he  can  undersell  his 
competitors  in  the  market,  unless  and  until  they  adopt  his 
improved  methods.  And  he  does  so  to  his  own  profit,  not 
because  the  application  of  intelligence  to  his  business  has 
increased  the  value  in  exchange  of  each  of  his  articles  of 
furniture.  Quite  the  contrary.  Precisely  by  reason  of 
that  fact  that  the  labour-value  embodied  in  every  piece  of 
furniture  has  been  reduced  by  his  foresight  and  superior 
business  aptitude  and  he  can  therefore  afford  to  accept  a 
lower  price  in  competition  with  his  rivals. 

Therefore,  the  whole  organisation  is  set  in  motion  again 
for  the  purpose  of  obtaining  surplus  value,  created  by  the 
expenditure  of  labour-power  for  which  no  wages  are  paid, 
in  the  manner  described  in  the  foregoing  pages.  The 
clever  organiser  or  manager  has  added  nothing  whatever  to 
the  valve  of  the  products  in  exchange,  whether  he  acts 
upon  the  Taylor  system,  or  any  other  device  for  improv- 
ing the  application  of  labour-power  to  the  production  of 
commodities. 


OBJECTIONS  TO  LABOUE  THEORY        251 

A  fourth  objection  brought  forward  since  the  war,  and 
especially  since  the  great  influence  of  extensive  labour  or- 
ganisations has  been  manifested  in  raising  wages  to  an 
unprecedented  nominal^,  and  even  relative,  height  (in  the 
United  States  more  particularly),  is  that  labourers  skilled 
and  unskilled  have  now  reached  such  a  status,  owing  to 
these  higher  wages,  which  they  have  secured  for  their  la- 
bour-power, and  the  shorter  hours  they  now  work,  that  it 
is  quite  out  of  place  to  speak  any  longer  of  "  subsistence 
wages  "  or  of  the  workers  as  "  wage-slaves  of  capital."  La- 
bourers, it  is  urged,  now  have  the  whip  hand  of  capital  and 
can  obtain  adequate  remuneration  for  their  toil,  after  cap- 
ital has  received  a  legitimate  profit.  To  speak  of  wage- 
earners  as  proletarians  who  drive  to  their  work  and  who  are 
not  compelled  to  toil  more  than  eight,  or  even  seven  or  six, 
hours  a  day  is  absurd.  Such  is  the  view  put  by  a  very  well- 
known  American  Social-Democrat. 

But  we  have  yet  to  see,  even  in  America,  where  wealth 
has  been  piled  up  during  the  past  seven  years  at  a  rate  quite 
unprecedented  in  economic  history,  that  this  remarkable 
relative  prosperity  for  the  wage-earners  will  be  maintained. 
In  Great  Britain,  the  uncertainty  of  maintaining  wages  at 
their  present  level  relatively  to  the  existing  high  prices  has 
already  impelled  most  of  the  labour  leaders  to  strive  for  a 
reduction  of  the  prices  of  the  necessary  articles  comprised 
in  the  standard  of  life  of  the  workers  in  preference  to  press- 
ing on  in  the  vicious  circle  of  higher  wages,  higher  prices, 
and  vice-versa.  This  is  due  to  the  fact,  proved  to  them  by 
actual  experience,  that  the  endeavour  to  raise  and  to  keep 
wages  at  a  level  which  represents  a  high  standard  of  sub- 
sistence, in  the  face  of  rapidly  rising  prices,  is  by  no  means 
easy  and  involves,  in  many  cases,  loss  and  privation  by 
strikes,  which  have  been  serious  and  frequent  of  late  years. 


252  THE  ECONOMICS  OF  SOCIALISM 

Even  the  very  highest  wages,  also,  and  that  illusory  cap- 
italist arrangement,  profit-sharing, —  feeding  a  dog  with 
sections  of  his  own  tail  —  do  not  change  in  the  very  least 
the  basic  conditions  of  capitalism ;  by  which  the  toilers  are 
divorced  from  any  control  over  their  own  means  of  making 
and  distributing  wealth,  suffer  from  constant  anxiety  as  to 
how  long  full  employment  will  last,  and  are  quite  unable 
to  emancipate  themselves  from  that  domination  of  the  cap- 
italists and  bourgeoisie  which  constitutes  them,  however 
well-paid,  a  wage-slave  class.  So  long,  likewise,  as  capital- 
ism and  production  of  commodities  for  profit  and  ex- 
change last,  so  long  as  they  are  obliged  to  sell  their  labour- 
power  for  money  wages  to  the  class  which  owns  the  means 
and  instruments  of  production  and  distribution,  including 
the  land  —  so  long  will  they  remain  a  wage-slave  class,  no 
matter  how  thickly  their  chains  may  be  temporarily  gilded 
by  high  remuneration. 

Finally,  we  have  the  supposed  economic  contradiction 
between  the  Third  Volume  of  the  "  Capital  "  and  the  First. 
This  is  the  only  point  which  really  affects  Marx's  theory  as 
a  theory.  But  we  must  begin  the  consideration  of  this 
assumed  contradiction  with  a  passing  reflection  upon  the 
strange  inconsistency  of  even  his  ablest  opponents.  Was 
Marx  the  man  of  extraordinary  ability  which  they  one  and 
all  admit  him  to  have  been  ?  Did  he  throughout  his  career 
invariably  exhibit  a  masterly  capacity  for  analysis  and  an 
admirable  command  of  logic  and  dialectic  in  all  its  forms? 
Unquestionably  he  did.  Could  he  be,  at  one  and  the  same 
time,  an  absurdly  confused  thinker,  who  worked  sixteen 
hours  and  more  a  day  during  the  greater  part  of  his  life  in 
chase  of  an  economic  will-o'-the-wisp  which  landed  him  in 
a  bottomless  bog  of  hopeless  incompatibility  at  the  close 
of  his  arduous  career?     Yet  that  is  what  the  majority  of 


OBJECTIONS  TO  LABOUR  THEORY        253 

his  critics  virtually  contend  that  he  was.  This  is  an  in- 
compatibility far  greater  than  that  which  these  same  crit- 
ics allege  that  they  have  discovered  in  his  writings.  How 
reconcile,  then,  these  contradictory  evaluations  of  Marx's 
intelligence  ?  How  account,  besides,  for  the  awkward  fact 
that  Engels,  himself  a  political  economist  second  only  to 
Marx,  and  a  very  shrewd  and  successful  man  of  business 
into  the  bargain,  was  afflicted  with  the  like  mental  inca- 
pacity, not  only  during  his  intimate  friend  Marx's  life- 
time, but  for  many  years  after  his  death  ? 

The  whole  idea  is  one  tissue  of  absurdity.  Marx  knew 
perfectly  well  what  he  was  about,  from  the  beginning  of  his 
work,  which  led  to  his  publication  of  "  Zur  Kritik  per  Poli- 
tischen  Economie,"  in  1859,  and  all  through.  Neither  he 
nor  Engels  was  in  the  slightest  degree  misled  by  a  chimera. 
There  is  no  contradiction  whatsoever  between  the  First 
Volume  of  the  "  Capital "  and  the  Third.  As  a  matter  of 
fact,  the  elaborate  notes  left  behind  by  Marx  for  the  Third 
Volume  were  made,  and  the  general  tenour  of  the  whole 
volume  was  decided  upon,  before  the  First  Volume  was  be- 
gun. There  was  not,  therefore,  and  there  could  not  have 
been,  any  attempt  on  Marx's  part,  he  being  in  collusion 
with  Engels,  to  fudge  in  the  Third  Volume  a  solution  to 
the  problem  which  Engels  propounded,  in  his  preface  to 
the  Second  Volume,  after  his  friend's  death ;  which  problem 
remained  wholly  unsolved  by  Marx's  critics  during  the 
years  that  elapsed  before  the  appearance  of  the  denounced 
Third  Volume. 

The  truth  is  that  one  and  all  of  Marx's  critics  in  this 
matter,  and  some  even  of  his  followers,  fail  to  comprehend 
thoroughly  the  very  foundations  of  that  great  writer's  sys- 
tematisation.  He  was  engaged  upon  an  elaborate  analysis 
and  explanation,  in  the  first  place,  of  the  general  laws  of 


254  THE  ECONOMICS  OF  SOCIALISM 

political  economy  in  the  abstract,  under  the  economic,  his- 
toric and  social  conditions  of  his  time,  as  a  mathematician 
might  investigate  the  general  laws  of  mechanics,  or  of 
vibrations.  Precisely  the  same  with  the  theory  of  social 
labour-value  in  exchange  and  the  consequences  deduced 
therefrom. 

The  main  reason  why  this  theory  has  been  misunderstood, 
by  those  political  economists  who  have  honestly  declared 
against  it,  is  that  they  have  not  thoroughly  grasped  the  full 
meaning  of  constant  capital,  as  distinguished  from  varia- 
ble capital,  in  the  sphere  of  capitalist  production,  and,  con- 
sequently, have  failed  to  comprehend  whence  surplus  value 
is  derived,  why  rate  of  profit  differs  from  rate  of  surplus 
value,  and  to  understand  the  general  effects  of  the  relations 
between  constant  capital  and  variable  capital,  in  the  func- 
tioning of  the  progressive  capitalist  system.  Now  in  the 
varying  composition  of  active  capitals  engaged  in  industry, 
the  constant  portion  which  consists  of  machinery  with  its 
wear-and-tear,  raw  materials,  incidental  materials,  &c.,  as 
already  stated,  is  always  becoming  relatively  larger  and 
larger,  as  society  advances  in  industrial  development. 
This  constant  capital,  with  all  its  constituent  values,  con- 
tributes no  additional  value  to  the  resultant  commodities 
in  the  course  of  production.     None  whatever. 

The  variable  portion  which  is  devoted  to  the  purchase  of 
labour-power  by  payment  of  wages  becomes  on  the  other 
hand  relatively  smaller  and  smaller.  This  variable  cap- 
ital it  is  which,  as  explained,  not  only  is  reproduced  in  the 
commodities  as  the  social  labour  value  of  the  wages  paid 
to  the  workers  for  their  labour-power  and  embodied  in  the 
commodity,  but  provides  the  surplus-value,  consisting  of 
unpaid  labour  embodied  in  the  same  commodities,  which  is 
the  object  of  the  whole  transaction.     As  has  been  seen  in 


OBJECTIONS  TO  LABOUR  THEORY        255 

the  chapter  on  "  Profit,"  the  rate  of  profit  is  reckoned  on 
the  whole  of  the  capital  embarked,  constant  capital 
as  well  as  variable  capital,  and  as  the  constant  capital 
relatively  to  the  total  caj)ital  embarked  continuously  in- 
creases and  the  variable  capital  which  comprises  in  its  pur- 
chase the  value-cxeating  la])our-power  continuously  de- 
creases, relatively  to  the  total  capital  embarked,  the  rate  of 
profit  must  continuously  fall. 

This  no  one  before  Marx  had  ever  explained. 

So,  likewise,  in  regard  to  the  partition  of  surplus  value 
and  gross  profit  into  its  various  distributive  parts.  This 
surplus  value  is  engendered  in  the  sphere  of  production :  it 
is  only  realised  in  the  sphere  of  circulation.  Commodities 
are  commonly  sold  by  the  individual  capitalist  producer  at 
a  price  considerably  below  this  actual  value  in  exchange, 
such  value,  as  a  whole,  comprising,  of  course,  the  total  sur- 
plus value  embodied  in  the  course  of  production,  and,  tem- 
porarily, at  the  disposition  of  this  capitalist  producer.  In 
that  way  he  hands  over  a  portion  of  the  surplus  value  he 
has  obtained  from  the  unpaid  labour  of  his  work-people 
embodied  in  commodities  (these  reckoned  as  the  gross 
profit  on  the  whole  of  his  own  capital  embarked  in  the  bus- 
iness) to  be  divided  up,  apart  from  rent,  among  the  capitals 
engaged  in  other  branches  of  business;  which,  of  them- 
selves, though  necessary  to  the  realisation  in  cash  of  surplus 
value  and  profit,  may  produce  no  surplus-value  whatever. 

Now  it  is  perfectly  true  that  if  of  two  industrial  capitals 
of  equal  size,  functioning  under  the  same  conditions,  one 
capital  is  composed  of  a  large  proportion  of  constant  cap- 
ital [capital  embarked  in  machinery,  raw  materials,  inci- 
dental materials,  &c.]  —  with  a  relatively  small  propor- 
tion of  variable  capital  —  [capital  embarked  in  paying 
wages  for  the  purchase  of  labour-power]  —  and  another 


356  THE  ECONOMICS  0^  SOCIALISM 

capital  consists  of  a  small  proportion  of  constant  capital 
with  a  relatively  large  proportion  of  variable  capital,  it  is 
directly  contrary  to  Marx's  entire  theory  of  labour-value 
that  both  these  capitals  should  produce  the  same  amount  of 
surplus-value. 

But  then  Marx  nowhere  says  that  they  do  or  can.  Far 
from  this,  he  expressly  states  in  the  Third  Volume  that  this 
is  quite  impossible.  Thus :  "  If  a  capital  consisting  of 
90  per  cent,  of  constant  capital  plus  10  per  cent,  of  varia- 
ble capital  produces  as  much  surplus-value,  or  gross  profit, 
with  the  same  degree  of  exploitation,  as  a  capital  consist- 
ing of  10  per  cent,  of  constant  capital  plus  90  per  cent,  of 
variable  capital,  then  it  would  be  as  clear  as  daylight  that 
surplus-value,  and  value  in  general,  must  have  an  entirely 
different  source  from  labour,  and  that  political  economy 
would  then  be  destitute  of  any  reasonable  foundation." 
Nothing  could  possibly  be  more  stringently  put  than  that. 
Yet  Marx  is  accused  of  having  "admitted  "  in  his  Third 
Volume  that  his  whole  labour  theory  was  unsound ! 

In  the  First  Volume  of  "  Capital "  the  operations  of  the 
individual  capitalist,  with  his  own  special  set  of  work- 
people and  the  surplus-value  they  produce  by  their  labour, 
are  dealt  with.  In  the  Third  Volume  the  manner  in  which 
the  total  surplus-value  is  obtained  and  the  gross  profits  are 
divided  up  among  the  various  groups  of  capitalists  is  in- 
vestigated and  the  way  in  which  an  average  rate  of  profit 
upon  capital  as  a  whole  is  arrived  at.  "We  are  no  longer 
looking  on  at  the  proceediugs  of  the  individual  capitalist: 
we  are  occupied  with  the  entire  social  capital  and  the  par- 
tition of  the  whole  of  ''he  surplus-value  produced  by  all  the 
wage-earners  under  capitalist  control. 

Under  these  conditions,  capitals  of  equal  dimensions  as  a 
whole  receive  equal  amounts  of  profit,  regardless  of  their 


OBJECTIONS  TO  LABOUR  THEORY        257 

composition  in  constant  and  variable  capital.  This  is  due 
to  the  fact  that,  although  they  do  produce  different  amounts 
of  surplus-value^  the  capital  which  contains  most  constant 
capital  obtains,  in  the  course  of  exchange  and  realisation, 
part  of  the  surplus-value  created  by  the  capital  which  con- 
tains most  variable  capital:  the  different  capitals  engaged 
in  the  various  spheres  of  production  and  distribution  re- 
ceiving their  remuneration  in  the  shape  of  average  profit, 
according  to  the  ordinary  rules  of  competition  and  supply 
and  demand. 

The  reason  why  this  explanation  has  not  been  grasped 
by  Marx's  critics,  and  is  imperfectly  understood  by  some 
of  his  own  followers,  is  that  they  do  not  distinguish  be- 
tween the  "  price  of  production  "  and  the  ordinary  "  cost 
of  production  " ;  because,  also,  they  will  persist  in  consider- 
ing the  question  of  the  apportionment  of  general  profit,  de- 
rived from  the  social  unpaid  labour  of  the  wage-earners  at 
large,  among  the  capitals  engaged  in  social  production 
and  distribution,  from  the  point  of  view  of  the  individual 
capitalist,  and  his  personal  appropriation  of  the  surplus 
value  produced  by  the  unpaid  labour  of  his  own  "  hands." 

Consequently,  they  fail  to  comprehend  how  it  comes 
about  that  capitals  with  relatively  greater  amounts  of  con- 
stant capital  in  their  composition  obtain  for  their  goods 
when  realised  prices  higher  than  their  exchange  value, 
measured  in  the  social  labour-value  embodied  in  them; 
while  capitals  with  relatively  less  constant  capital  in  their 
composition  obtain  lower  prices  for  theirs.  This  is  in  com- 
plete consonance  with,  and  not  in  opposition  to,  the  social 
labour  theory  of  value. 


CHAPTER  XI 

THE  FINAL  FUTILITY  OF  FINAL  UTILITY 

The  growth  of  general  interest  in  political  economy,  or 
economics,  and  the  increasing  number  of  people  of  all 
classes  who  devote  themselves  to  the  serious  study  of  this 
difficult  subject  is  one  of  the  most  hopeful  signs  of  the 
times.  We  are  manifestly  in  a  period  of  crucial  transition, 
alike  economically  and  politically.  It  is  impossible,  how- 
ever, to  deal  consciously  with  this  development,  due  in  the 
main  to  the  productive  forces  of  our  time,  unless  the  sys- 
tem in  which  we  are  at  present  living  is  understood,  and 
its  tendencies  are  comprehended  by,  at  any  rate,  a  consid- 
erable fraction  of  the  active  part  of  the  community. 

Consequently,  discussions  on  the  theoretical  basis  of  eco- 
nomics are  more  necessary  now  than  ever  before.  If  there 
are  among  educated  and  thoughtful  men  two  diametrically 
opposed  and  incompatible  theories  in  regard  to  what  regu- 
lates the  exchange  value  of  the  commodities  which  consti- 
tute the  wealth  of  our  modern  society,  nothing  is  to  be 
gained  by  shading  over  the  antagonism  between  these  con- 
flicting schools  of  thought.  Far  better  is  it,  in  my  opinion, 
to  accentuate  the  differences  which  undoubtedly  exist  on  this 
point,  in  order  that  students  may  be  led  to  think  out  the 
whole  question  for  themselves,  uninfluenced  by  mere  au- 
thority, or  great  reputations  on  either  side. 

The  object  of  this  i-hapter  is  to  expose  the  fallacies  of 
the  theory  of  Final  Utility  as  a  measure  of  value.  The 
theory  is,  of  course,  associated  with  the  name  of  Professor 

258 


FINAL  FUTILITY  OF  FINAL  UTILITY      259 

Stanley  Jevons,  and  is  accepted  at  the  present  time  by 
many  academic  economists.  If  I  can  show  that  this  theory 
is  merely  an  obscure  way  of  re-stating  the  old  supply-and- 
demand  thesis  of  Lord  Lauderdale,  Bastiat,  and  others; 
that  its  originator  does  not  adhere  to  it  himself;  that 
neither  in  his  own  hands  nor  in  those  of  his  followers  has 
it  solved  any  great  problem  or  led  the  way  to  any  dis- 
covery, but,  on  the  contrary,  has  rendered  confusion  worse 
confounded,  and  has  given  rise  to  the  most  ridiculous  con- 
jectures and  absurd  assumptions;  that  also  his  principal 
supporter  himself  abandons  his  master's  own  dialectic  —  if 
I  succeed  in  doing  this,  I  venture  to  think  that  I  shall  have 
justified  the  title  of  my  chapter. 

I  may  say,  however,  that  I  do  not  propose  to  inflict  any 
portion  of  the  Differential  Calculus  upon  my  readers.  If 
it  pleases  my  critics  to  aver  that  my  not  having  set  out  in 
full  Homersham  Cox's  proof  of  Taylor's  Theorem  is  irre- 
fragable evidence  that  I  am  incapable  of  understanding 
how  it  comes  about  that  a  quarter  of  wheat  and  a  definite 
sum  in  gold  constitute  an  equation  of  value  in  London  to- 
day, I  shall  not  attempt  to  controvert  them.  Neither  shall 
I  raise  any  objection  if  they  constate  that  my  inability  to 
discover  the  locus  of  the  curve  of  human  greed,  or  to  ex- 
press the  limits  of  human  happiness  in  the  form  of  an 
algebraic  expansion,  inevitably  prevents  me  from  fathom- 
ing the  mysteries  of  capitalist  production  for  profit.     I 

shall  allow  all  the  missiles  of  —    to  fly  round  my  head 

dx 
without  dodging,  and  the  fragments  of  Conic  Sections  that 
may  be  aimed  at  me  will  not  disturb  my  intellectual  equa- 
nimity for  a  moment  —  impavidum  ferient  ruinoe  —  the 
debris  of  shattered  arguments  are  not  rendered  more  for- 


360  THE  ECONOMICS  OF  SOCIALISM 

midable  by  being  enveloped  in  useless  mathematical  for- 
mulae. 

"Eepeated  reflection  and  inquiry,"  says  Jevons  at  the 
beginning  of  his  work  on  "  The  Theory  of  Political  Econ- 
omy," "  have  led  me  to  the  somewhat  novel  opinion  that 
value  depends  entirely  upon  utility."  Eicardo  had  already 
answered  this  bald  and  "  somewhat  novel  "  statement  by  an- 
ticipation when  he  wrote :  "  When  I  give  2,000  times  more 
cloth  for  a  pound  of  gold  than  I  give  for  a  pound  of  iron, 
does  it  prove  that  I  attach  2,000  times  more  utility  to  gold 
than  I  do  to  iron  ?  Certainly  not :  it  proves  only  that  the 
cost  of  production  of  gold  is  2,000  times  greater  than  the 
cost  of  production  of  iron.  If  the  cost  of  production  of  the 
two  metals  were  the  same  I  should  give  the  same  price  for 
them;  but  if  utility  were  the  measure  of  value  it  is  probable 
I  should  give  more  for  the  iron.  It  is  the  competition  of 
producers  .  .  .  which  regulates  the  value  of  different  com- 
modities. If,  then,  I  give  one  shilling  for  a  loaf  and  21 
shillings  for  a  guinea,  it  is  no  proof  that  this  in  my  esti- 
mation is  the  comparative  measure  of  their  utility." 

But  it  would  appear  that  Jevons,  who  protests  most  rea- 
sonably, as  other  economists  have  done  before  and  since, 
against  the  use  of  the  word  "  value  "  to  express  various 
meanings  in  economics,  plays  the  same  trick  with  the  word 
"  utility "  on  his  own  account.  He  is  analysing,  or  at- 
tempting to  analyse,  the  ratio  of  exchange  in  a  society  in 
which,  economically  speaking,  exchange  is  the  dominant 
factor.  It  is  not  merely  the  superfluity  which  is  ex- 
changed after  the  needs  of  the  producers  themselves  are  sat- 
isfied, nor  is  production  for  exchange  the  object  of  one  por- 
tion of  the  community,  and  production  for  immediate  use 
that  of  another.  All  goods  arc  produced  for  exchange  on 
the  market  of  the  world ;  and,  in  tlie  majority  of  cases,  the 


FINAL  FUTILITY  OF  FINAL  UTILITY      261 

articles  produced  are  of  no  utility  to  the  persons  who  pro- 
duce them. 

The  commodities  are  produced  under  the  control  of  a 
particular  class,  namely,  the  capitalists,  for  profit;  and 
chemical,  mechanical,  and  other  improvements  are  going 
on  which  fall  into  the  hands  of  this  dominant  class  and 
are  used  by  them,  in  competition  with  their  fellows,  to 
extend  their  own  market,  and  lessen  that  of  their  rivals. 
The  determining  element  in  this  struggle  is  cheapness. 
The  scale  of  production  is,  however,  determined  by  these 
same  social  considerations.  A  manufacturer  cannot  pro- 
duce on  the  scale  which  he  himself  pleases.  That  is  de- 
termined for  him  by  his  surroundings.  He  must  use  the 
best  machinery,  and  organise  his  hands  in  the  most  ap- 
proved method,  or  submit  to  being  crushed  out  by  those 
who  read  the  signs  of  the  times  and  translate  them  into  ac- 
tion better  than  he  can. 

Nowadays,  also,  it  is  not  demand  which  invariably  pre- 
cedes supply,  but  supply  which  in  many  cases  anticipates 
and  almost  forces  demand.  Furthermore,  the  utility  of 
different  articles  thus  produced  by  capitalists  for  exchange 
is  determined,  not  by  their  real  utility,  in  the  sense  of  use- 
fulness to  the  consumers,  but  by  the  social  position  and 
purchasing  power  of  those  consumers  in  the  society  of  the 
time.  Purchase  and  sale  of  course  involve  sale  and  pur- 
chase :  a  quantity  of  saleable  values  on  the  one  side  which 
the  owner  is  ready  to  sell,  and  a  quantity  of  saleable  values 
on  the  other  side  with  which  the  owner  is  willing  to  buy. 
The  production  and  the  consumption  are  in  such  conditions 
purely  and  manifestly  social;  but  the  exchange,  likewise  a 
social  function,  is  conducted  under  individual  control, 
because  appropriation  of  the  product  is  still  under  indi- 
vidual   (or  capitalist  company)   ownership. 


262  THE  ECONOMICS  OF  SOCIALISM 

It  is  the  production  and  exchange  of  commodities  in 
such  conditions,  I  say,  which  Professor  Jevons  sets  himself 
to  examine.  According  to  him,  when  two  commodities  are 
exchanged  on  a  free  market,  the  production  of  such  com- 
modities being  practically  capable  of  indefinite  increase  and 
not  restricted  or  monopolised  —  this  is  the  essence  of  com- 
petitive capitalism  —  then  that  exchange,  so  effected,  pro- 
claims that  the  "  final  utility  "  of  the  two  sides  of  the  trade 
equation  is  the  same.  This,  and  not  the  quantity  of  sim- 
ple, abstract,  social  human  labour  embodied  in  the  com- 
modities on  either  side,  determines  the  "  ratio  of  their  ex- 
change," their  relative  value.  But  let  Jevons  speak  for 
himself,  only  taking  note  of  the  fact  that  he  investigates 
social  phenomena  from  the  purely  individval  point  of  view 
of  individual  interest,  individual  desire,  and  individual 
labour. 

"  Utility,"  he  says,  "  though  a  quality  of  things,  is  no 
inherent  quality.  We  can  never,  therefore,  say  absolutely 
that  some  objects  have  utility  and  others  have  not.  The 
ore  lying  in  the  mine,  the  diamond  escaping  the  eye  of  the 
searcher,  the  wheat  lying  unreaped,  the  fruit  ungathered 
for  want  of  consumers,  have  no  utility  at  all.  The  most 
wholesome  and  necessary  kinds  of  food  are  useless  unless 
there  are  hands  to  collect  and  mouths  to  eat  them  sooner 
or  later." 

How  scientific,  how  enlightening,  how  truly  philosophic 
is  all  this !  Platitude  reduced  to  its  final  imbecility  could 
surely  no  further  go.  "  Nor,  when  we  consider  the  matter 
closely  ( !),  can  we  say  that  all  portions  of  the  same  com- 
modity possess  equal  utility.  A  quart  of  water  per  day 
has  the  high  utility  ol  saving  a  person  from  dying  in  a 
most  distressing  manner.     Several  gallons  a  day  may  pos- 


FINAL  FUTILITY  OF  FINAL  UTILITY      263 

sess  much  utility  for  such  purposes  as  cooking  and  wash- 
ing; but,  after  an  adequate  supply  is  secured  for  these 
uses,  any  additional  quantity  is  a  matter  of  comparative  in- 
difference. All  that  we  can  say,  then,  is  that  water,  up  to 
a  certain  quantity,  is  indispensable ;  that  further  quantities 
will  have  various  degrees  of  utility ;  but  that  beyond  a  cer- 
tain quantity,  the  utility  sinks  gradually  to  zero;  it  may 
even  become  negative,  that  is  to  say,  further  supplies  of  the 
same  substance  may  become  inconvenient  and  harmful." 

That  is  to  say,  a  flood  may  sweep  everything  away  and 
drown  "  a  person  "  who  might,  without  a  quart  of  it,  have 
died  of  thirst ! 

Jevons  proceeds  to  apply  the  same  luminous  method  of 
investigation  to  bread  and  clothes,  and  then  goes  on: 
"  Utility  must  be  considered  as  measured  by,  or  even  as 
actually  identical  with,  the  addition  made  to  a  person's 
happiness.  It  is  a  convenient  name  for  the  aggregate  of 
the  favourable  balance  of  feeling  produced  —  the  sum  of 
the  pleasure  created  and  the  pain  prevented.  We  must  now 
carefully  discriminate  between  the  total  utility  arising 
from  any  commodity  and  the  utility  attaching  to  any  par- 
ticular portion  of  it.  Thus  the  total  utility  of  the  food  we 
eat  consists  in  maintaining  life,  and  may  be  considered  as 
infinitely  great" — didn't  Esau,  when  famishing,  sell  his 
birthright  for  a  mess  of  pottage?  —  "but  if  we  were  to 
subtract  a  tenth  part  from  what  we  eat  daily  our  loss  would 
be  but  slight.  We" — who  are  we? — "should  certainly 
not  lose  a  tenth  part  of  the  whole  utility  to  us.  It  might 
be  doubtful  if  we  should  suffer  any  harm  at  all " —  obvi- 
ously Jevons  had  only  the  well-fed  or  over-fed  classes  in 
his  mind. 

"Let  us  imagine  the  whole  quantity  of  food  which  a 


264  THE  ECONOMICS  OF  SOCIALISM 

person  consumes  on  an  average  during  twenty-four  hours 
to  be  divided  into  ten  equal  parts.  If  his  food  be  reduced 
by  the  last  part,  he  will  suffer  but  little;  if  a  second  part 
be  deficient,  he  will  feel  the  want  distinctly;  the  subtrac- 
tion of  the  third  tenth  will  be  decidedly  injurious;  with 
every  subsequent  subtraction  of  a  tenth  part  his  sufferings 
will  be  more  and  more  serious,  until  at  length  he  will  be 
on  the  verge  of  starvation" — last  of  all  the  man  died 
also! 

And  then  Mr.  Jevons  is  good  enough  to  squirt  a  few 
pages  of  mathematics  at  us  to  illustrate,  or  obscure,  this 
his  most  exquisite  reasoning  on  the  theory  of  value  in  ex- 
change. But  he  gives  it  all  over  again  a  little  later, 
returning  to  his  favourite  water  illustration.  "  We  cannot 
live  without  water,  and  yet  in  ordinary  circumstances  we 
set  no  value  on  it.  Why  is  this?  Simply  because  we  have 
so  much  of  it  that  its  final  degree  of  utility  is  reduced 
nearly  to  zero.  We  enjoy  every  day  the  almost  infinite 
utility  of  water,  but  then  we  do  not  need  to  consume  more 
than  we  have.  Let  the  supply  run  short  by  drought,  and 
we  begin  to  feel  the  higher  degrees  of  utility  of  which  we 
think  but  little  at  other  times." 

Wliat  is  all  this  but  the  old  "  supply  and  demand  "  with 
a  veil  over  its  face  ?     Compare  Lord  Lauderdale : 

"  With  respect  to  the  variations  in  value,  of  which  every- 
thing valuable  is  susceptible,  if  we  could  suppose  for  a 
moment  that  any  substance  possessed  intrinsic  and  fixed 
value  so  as  to  render  an  assumed  quantity  of  it  constantly, 
under  all  circumstances,  of  equal  value,  then  the  degree 
of  all  tilings,  ascertaired  by  such  a  fixed  standard,  would 
vary  according  to  the  proportion  betwixt  the  quantity  of 
them  and  the  demand,  and  every  commodity  would  of 


FINAL  FUTILITY  OF  FINAL  UTILITY      265 

course  be  subject  to  a  variation  from  four  different  cir- 
cumstances. 

"  1.  It  would  be  subject  to  an  increase  of  its  value  from 
a  diminution  of  its  quantity. 

"  2.  To  a  diminution  of  its  value  from  an  augmentation 
of  its  quantity. 

"3.  It  might  suffer  an  augmentation  in  its  value  from 
the  circumstance  of  an  increased  demand. 

"  4.  Its  value  might  be  diminished  by  a  failure  of  de- 
mand. 

"  As  it  will,  however,  clearly  appear  that  no  commodity 
can  possess  fixed  and  intrinsic  value  so  as  to  qualify  it  for 
a  measure  of  value  of  other  commodities,  mankind  are 
induced  to  select  as  a  practical  measure  of  value  that  which 
appears  to  be  least  liable  to  any  of  these  four  sources 
of  variation  which  are  the  sole  causes  of  alteration  or 
value. 

"  When  in  common  language,  therefore,  we  express  the 
value  of  any  commodity,  it  may  vary  at  one  period  from 
what  it  is  at  another,  in  consequence  of  eight  different 
contingencies : 

"  1.  From  the  four  circumstances  above-stated,  in  rela- 
tion to  the  commodity  of  which  we  mean  to  express  the 
value. 

"  2.  From  the  same  four  circumstances  in  relation  to 
the  commodity  we  have  adopted  as  a  measure  of  value. 

"  Water,  it  has  been  observed,  is  one  of  the  things  most 
useful  to  man,  yet  it  seldom  possesses  any  value;  and  the 
reason  of  this  is  evident :  it  rarely  occurs  that  to  its  quality 
of  utility  is  added  the  circumstance  of  existing  in  scarcity ; 
but  if,  in  the  course  of  a  siege,  or  a  sea-voyage,  it  becomes 
scarce,  it  instantly  acquires  value;  and  its  value  is  subject 


266  THE  ECONOMICS  OP  SOCIALISM 

to  the  same  rule  of  variation  as  that  of  other  commod- 
ities." 1 

Eedueed  to  their  elements,  all  Jevons'  "final  utility," 
"esteem,"  and  the  like,  are  contained  in  that  passage.  It 
is  unnecessary  to  quote  Eicardo's  criticism  in  view  of  other 
portions  of  this  chapter  which  follow.  But  it  is  surely 
manifest  that  in  a  free  market,  for  commodities  which 
may  be  increased  to  practically  any  extent,  the  phenomena 
of  supply  and  demand  are  but  superficial.  What  really 
regulates  the  relative  exchange  value  is  the  quantity  of 
social  human  labour  embodied  in  tlie  commodity  on  the  two 
sides,  the  demand  and  supply  fluctuations  being  averaged 
over  longer  or  shorter  periods. 

The  form  of  price  to  which  Lord  Lauderdale  refers  does 
but  give  the  quantity  of  labour  embodied  in  commodities, 
its  name  in  money.  Now  "  magnitude  of  value  expresses 
a  relation  of  social  production;  it  expresses  the  connection 
that  necessarily  exists  between  a  certain  article  and  the 
portion  of  the  total  labour-time  of  society  required  to  pro- 
duce it.  As  soon  as  the  magnitude  of  value  is  converted 
into  price,  the  above  necessary  relation  takes  the  shape  of 
a  more  or  less  accidental  exchange  ratio  between  a  single 
commodity  and  another,  the  money  commodity. 

"  But  this  exchange-ratio  may  express  either  the  real 
magnitude  of  that  commodity's  value  or  the  quantity  of 
gold  deviating  from  that  value  for  which,  according  to 
circumstances,  it  may  be  parted  with.  The  possibility, 
therefore,  of  incongruity  between  price  and  magnitude  of 
value  " —  the  productive  power  of  labour  remaining  con- 
stant — "  or  the  deviation  of  the  former  from  the  latter,  is 
inherent  in  the  price-form  itself.     This  is  no  defect,  but, 

1 "  An  Inquiry  into  the  Nature  and  Origin  of  Public  Wealth," 
pp.  15-16. 


FINAL  FUTILITY  OF  FINAL  UTILITY      267 

on  the  contrary,  admirably  adapts  the  price-form  to  a  mode 
of  production  whose  inherent  laws  impose  themselves  only 
as  the  mean  of  apparently  lawless  irregularities  that  com- 
pensate one  another."  ^ 

But  our  Professor  is  not  content  with  "  utility,"  ^'  final 
utility,"  and  "  commodity."  He  treats  us  to  a  theory  of 
"  discommodity  "  or  "  disutility,"  which,  it  seems,  too,  is 
a  something  which,  being  a  nuisance,  helps  us  to  realise 
the  conception  of  value  in  exchange.  So  fond  is  he  of 
this  notion  also  that  he  repeats  it  two  or  three  times.  The 
sewage  of  great  towns,  for  instance,  "  we  can  hardly  call 
it  a  commodity/'  (  !)  "  acquires  a  higher  and  higher  degree 
of  disutility  the  greater  the  quantity  to  be  disposed  of." 

But  now,  to  use  Jevons'  phrase,  let  us  investigate  the 
subject  a  little  more  closely :  "  In  exchange  for  a  diamond 
we  can  get  a  great  quantity  of  iron,  or  corn,  or  paving- 
stones,  or  other  commodity  of  which  there  is  abundance; 
but  we  can  get  very  few  rubies,  sapphires,  or  other  precious 
stones.  Silver  is  of  high  purchasing  power  compared  with 
zinc,  or  lead,  or  iron,  but  of  small  purchasing  power  com- 
pared with  gold,  or  platinum,  or  iridium."  Why  is  this? 
Because  —  it  is  Professor  Jevons  who  tells  us  so  — "  noth- 
ing can  have  a  high  purchasing  power  unless  it  be  highly 
esteemed  in  itself;  but  it  may  be  highly  esteemed  apart 
from  all  comparison  with  other  things  " —  what  on  earth 
has  this  to  do  witli  exchange-value  then  ?  — "  and,  though 
highly  esteemed,  it  may  have  a  low  purchasing  power 
because  those  things  against  which  it  is  measured  are  still 
more  esteemed." 

From  which  it  should  now  appear  that  not  "  utility  "  but 
"  esteem  "  is  the  measure  of  the  value  of  commodities. 

1  Karl  Marx,  "Das  Capital,"  p.  132. 


268  THE  ECONOMICS  OF  SOCIALISM 

But  then  Jevons  puts  the  whole  thing  right  in  this 
way: 

"(1)  Value  in  use  equals  total  utility, 

"(2)   Esteem  equals  final  degree  of  utility. 

"(3)   Purchasing  power  equals  ratio  of  exchange." 

All  which  no  doubt  advances  our  knowledge  greatly! 

But  the  main  point  is  that  labour  embodied  in  commodi- 
ties is  not  the  measure  of  their  value;  though,  strange  as 
it  may  seem,  "  economists  have  not  been  wanting "  who 
have  advanced  this  monstrous  proposition.  "  But  though 
labour  is  never  the  cause  of  value  " —  what  does  the  word 
"  cause "  mean  here  ?  — "  it  is  in  a  large  proportion  of 
cases  the  determining  circumstance,  and  in  the  following 
way:  Value  depends  solely  on  the  filial  degree  of  utility 
[otherwise  *  esteem'].  Hoiv  can  we  vary  this  degree  of 
utility?  By  having  more  or  less  of  the  commodity  to 
consume.  But  how  shall  we  get  more  or  less  of  it?  By 
spending  more  or  less  labour  in  obtaining  a  supply. 

"  According  to  this  view,  then,  there  are  two  steps 
between  labour  and  value.  Labour  affects  supply,  and 
supply  affects  the  degree  of  utility,  which  governs  value,  or 
the  ratio  of  exchange.  In  order  that  there  may  be  no 
possible  mistake  about  this  all-important  series  of  relations 
I  will  re-state  it  in  a  tabular  form  as  follows: 

''  Cost  of  production  determines  supply; 
Supply  determines  final  degree  of  utility; 
Final  degree  of  utility  determines  value." 

The  italics  throughout  are  Professor  Jevons'.  I  think 
everyone  will  agree  with  me  that  nothing  can  be  more 
strenuously  put.  The  Professor  was  exceedingly  anxious 
that  there  should  "  be  no  possible  mistake "  about  that 


FINAL  FUTILITY  OF  FINAL  UTILITY      369 

which  he  manifestly  regarded  as  the  keystone  of  the  arch 
of  his  whole  theory. 

Now  hear  his  most  distinguished  disciple  and  follower 
on  this  very  passage.  He  speaks  of  the  "  loose  and  inac- 
curate "  terms  of  the  statement  quoted,  and  goes  on :  "Let 
us  turn  then  to  examine  the  chain  of  causation  in  which 
Jevons'  central  position  is  formulated,  in  his  second  edi- 
tion, and  compare  it  with  the  position  taken  up  by  Hicardo 
and  Mill.  He  says:  'Cost  of  production  determines 
supply/  &c.,  as  above.  Now  if  this  series  of  causations 
really  existed  there  could  be  no  great  harm  in  omitting  the 
intermediate  stage  and  saying  that  cost  of  production 
determines  value.  For  if  A  is  the  cause  of  B  which  is 
the  cause  of  C,  then  A  is  the  cause  of  C."  Surely  a  very 
economic  Daniel  come  to  judgment.  "  But," — pray  mark 
this,  Mr.  H.  S.  Foxwell;  read  it,  Mr.  Philip  Wicksteed, 
and  inwardly  digest  it,  Mr.  Sidney  Webb  — "  but  in  fact 
there  is  no  such  series !  " 

So  far  as  I  am  aware,  not  one  of  the  minor  lights  of  the 
Jevonian  firmament  has  twinkled  out  a  reply  to  this  direct 
and  rather  brutal  contradiction.  Which  is  right  and  which 
is  wrong  or  whether  both  are  in  error,  does  not  concern 
me  at  present. 

For,  in  truth,  it  is  not  necessary  to  go  beyond  Jevons 
himself  to  show  how  much  importance  we  need  attach  to 
his  utility  \aews.  For  instance  (at  p.  186  of  the  third 
edition,  p.  181  of  the  first  edition,  of  his  "  Theory  of  Polit- 
ical Economy  "  )  he  says :  "  It  may  tend  to  give  the  reader 
confidence  in  the  preceding  theories  when  he  finds  that 
they  lead  directly  to  the  well-knowTi  law,  as  stated  in  the 
ordinary  language  of  economists,  that  value  is  proportional 
to  the  cost  of  production."    When  I  first  read  this  passage, 


270  THE  ECONOMICS  OF  SOCIALISM 

more  than  five-and-forty  years  ago,  I  threw  down  the  book. 
I  felt  that  I  had  been  made  a  fool  of  through  the  previous 
180  pages,  which,  indeed,  had  conveyed  not  a  single  fresh 
idea  to  my  mind.  It  is  as  complete  a  self-exposure  as 
Henry  George's  famous  economic  bull,  that  all  which  is  not 
wages  is  rent. 

But  Professor  Jevons  must  needs  set  out  an  equation  of 
ratios  to  confirm  the  matter.  At  p.  191  we  find  the  fol- 
lowing : 

"Value  per  unit  of  x      cost  of  production  per  unit  of  x. 


Value  per  unit  of  y       cost  of  production  per  unit  of  y. 

or,  in  other  words,  value  is  proportional  to  cost  of  produc- 
tion." Once  more  the  italics  are  Professor  Jevons'.  "  As, 
moreover,  the  final  degrees  of  utility  of  commodity  are 
inversely  as  the  quantities  exchanged,  it  follows  that  the 
values  per  unit  are  directly  proportional  to  the  final  degrees 
of  utility  " —  have  we  reached  the  final  degree  of  futility 
through  all  this  wearisome  logomachy?  For  if  "the  ratio 
of  exchange  " —  in  other  words,  the  value  — "  of  any  two 
commodities  will  be  determined  by  a  kind  of  struggle 
between  the  conditions  of  consumption  and  production," 
which  is  the  temporary  higgling  of  the  market,  influenced 
by  supply  and  demand  on  either  side,  and  "  value  is  pro- 
portional to  the  cost  of  production,"  we  are  merely  landed 
where  the  classical  school  of  economists  placed  us  80  years 
ago.  We  have,  in  fact,  what  Jevons  himself  calls  "  the 
well-known  and  almost  self-evident  law  that  articles  which 
can  be  produced  in  greater  or  less  quantity  exchange  in 
proportion  to  their  cost  of  production.  The  ratio  of  ex- 
change of  commodities  will,  as  a  fact,  conform  in  the  long 
run  to  the  cost  of  production." 


FINAL  FUTILITY  OF  FINAL  UTILITY      271 

And  again,  "  Thus  we  have  proved  " —  by  certain  math- 
ematical formulae  — "  that  commodities  will  exchange  in 
any  market  in  the  ratio  of  the  quantities  produced  by  the 
same  quantity  of  labour.  But  as  the  increment  of  labour 
considered  is  always  the  final  one,  our  equation  also  ex- 
presses the  truth  that  articles  will  exchange  in  quantities 
inversely  as  the  cost  of  production  of  the  most  costly  por- 
tions, i.  e.,  the  last  portion  added." 

The  sentence  italicised  by  Jevons  is  most  unscientifically 
and  incorrectly  expressed.  If,  for  example,  in  an  open 
market,  say  for  typewriters,  "  the  last  portion  added  "  is 
more  cheaply  produced  than  all  the  rest,  then  beyond  all 
question  this  last  portion,  if  added  in  sufficient  quantity, 
will  reduce  the  exchange  value  of  all  similar  articles  to  its 
own  lower  level  in  comparison  with  other  articles  whose 
cost  of  production  remains  stationary.  But  all  this  is 
temporarily  determined  by  the  higgling  of  the  market. 
The  law  that  commodities  exchange  on  the  average  in  rela- 
tion to  the  quantity  of  simple,  abstract,  social  human  labour 
embodied  in  them,  asserts  itself  in  despite  of  fluctuation. 

No  attempt  whatever  is  made  by  our  Professor,  be  it 
observed,  to  analyse  this  "  cost  of  production,"  this  "  quan- 
tity of  labour."  Jevons  takes  the  phrase  as  he  found  it  and 
leaves  it  there.  Jevons  was  wholly  ignorant  of  German, 
an  ignorance  which  his  followers  have  for  the  most  part 
themselves  assiduously  cultivated.  Yet  it  might  have  been 
thought  that,  by  the  year  1879,  Jevons  would  have  heard 
of  the  celebrated  system  of  Marx,  based  upon  simple, 
abstract,  social  human  labour  as  the  measure  of  the  value 
of  commodities  in  exchange;  of  the  mehrwerth  theory 
growing  out  of  it;  of  the  complete  analysis  of  the  cate- 
gories of  capital  and  the  circulation  of  commodities  which 
followed;  and  even  of  the  admirable  criticisms  on  Adam 


272  THE  ECONOMICS  OF  SOCIALISM 

Smith,  Eicardo,  the  Physiocrats,  and  others  which  are  now 
to  be  found  in  the  second  German  volume.  Apparently 
he  had  not. 

At  any  rate,  Professor  Jevons  was  content  with  the  old 
confusions,  and  made  no  effort  to  clear  them  up.  "  Fixed 
and  Circulating  Capital "  he  supplements  by  such  a  mean- 
ingless phrase  as  "  Free  and  Invested  Capital "  ;  but  of 
Constant  Capital,  Variable  Capital,  Money  Capital,  Goods 
Capital,  Circulation  Capital,  in  addition  to  Fixed  and  Cir- 
culating Capital,  he  and  his  followers  still  seem  to  be 
equally  ignorant,  regardless  of  the  flood  of  light  which 
Marx's  subtle  and  exhaustive  investigations  have  thrown 
upon  the  whole  sphere  of  the  production  and  circulation  of 
commodities  in  modern  society. 

With  labour  it  is  the  same.  The  value  of  labour  is 
spoken  of  as  if  it  had  not  been  shown  conclusively  that 
labour  has  no  value,  that  labour  can  have  no  value,  apart 
from  the  commodities  in  which  it  is  embodied.  "  I  hold 
labour,"  he  says,  "  to  he  essentially  variable,  so  that  its 
value  must  he  determined  hy  the  value  of  the  produce,  not 
the  value  of  the  produce  hy  that  of  the  labour."  Which 
means  —  what  ?  That  the  labour  of  a  Zulu  embodied  in  a 
diamond  is  worth  more  than  the  labour  of  the  same  Zulu 
for  an  equal  time  embodied  in  cane  sugar?  I  am  glad  I 
am  not  called  upon  to  answer. 

But  Jevons  actually  jumbles  up  the  productive  labourers 
with  barristers,  merchants,  schoolmasters,  and  the  like! 
The  exertion  of  vital  force  which  incorporates  labour  in 
commodities  he  puts  on  the  same  economic  plane  as  the 
exertion  of  vital  force  to  secure  the  acquittal  of  a  mur- 
derer, or  the  successful  placing  on  the  market  of  a  large 
parcel  of  adulterated  goods.  Old  Sir  William  Petty  taught 
him  better  than  that  more  than  two  hundred  years  ago. 


FINAL  FUTILITY  OF  FINAL  UTILITY      273 

For  the  father  of  modern  political  economy  speaks  of  such 
"  labourers  "  as  these  as  persons  "  who  properly  and  orig- 
inally earn  nothing  from  the  public,  being  only  a  kind  of 
gamesters  who  play  with  one  another  for  the  labours  of 
the  poor,  yielding  of  themselves  no  fruit  at  all."  But  a 
Professor  of  Political  Economy  at  the  University  of 
Oxford,  at  the  end  of  the  reign  of  Queen  Victoria,  who 
could  write  as  if  the  labour  of  a  lawyer  is  the  same  in  kind 
as  the  labour  of  an  artisan,  who  also  was  quite  ignorant  of 
the  meaning  of  social  human  labour  in  its  simple,  abstract 
form,  was  not  a  man  likely  to  learn  from  a  genuine  thinker 
on  Political  Economy  of  the  reign  of  Charles  IT. 

Professor  Jevons  himself,  I  may  note,  made  no  distinc- 
tion whatever  between  labour-power  and  labour.  Yet 
labour-power  is  the  value-creating  commodity,  which  the 
capitalist  buys,  like  other  commodities  on  the  market,  and 
pays  for  in  the  form  of  money  wages;  and  labour  is  the 
measure  of  the  value  of  the  commodities  produced,  in 
excliange  with  other  commodities.  Professor  Alfred 
Marshall  takes  the  distinction,  without  a  word  of  acknowl- 
edgment, from  Marx,  but  does  not  know  what  to  do  with  it 
when  he  has  got  it.  Do  what  he  would,  however,  he  could 
not  possibly  make  a  greater  mess  of  his  analysis  than  his 
master,  Professor  Jevons,  did  before  him. 

For  instance,  Jevons  says :  "  The  view  which  I  accept 
concerning  the  rate  of  wages  is  not  more  difficult  to  com- 
prehend than  the  current  one.  It  is  that  the  wages  of  a 
working-man  are  ultimately  coincident  with  what  he  pro- 
duces after  the  deduction  of  rent,  taxes  and  the  interest  on 
capital."  Is  not  that  luminous  ?  The  wages  of  "  a  work- 
ing-man "  are  what  he  can  get,  after  landlord,  government 
and  (shall  we  say?)  banker  have  scrambled  for  their 
portions ! 


274  THE  ECONOMICS  OF  SOCIALISM 

To  begin  with,  in  our  present  form  of  production,  no 
human  being  can  tell  what  any  single  working-man  has 
produced.  It  is  quite  impossible  to  differentiate  his  single 
bit  of  social  work  from  the  mass  in  which  it  is  blended  and 
lost.  How  much  further  forward,  therefore,  are  we  for 
this?  But  in  his  other  explanations,  Jevons  is  much  less 
clear  even  than  Adam  Smith  or  Quesnay ;  for  he  omits  alto- 
gether to  take  into  consideration  the  "constant  capital," 
the  raw  materials,  the  incidental  materials,  &c.,  which, 
though  changed  in  form,  appear,  unchanged  in  value,  in 
the  complete  product.  Are  we  to  understand  that  this 
belongs  to  "  a  working-man  "  ?     Of  course  not. 

But  such  foolish  omissions  are  only  of  a  piece  with  the 
astounding  statement  which  follows :  "  The  fact  that  the 
workers  are  not  their  own  capitalists  introduces  com- 
plexity into  the  problem  "  ! !  The  fact  that  the  workers, 
as  a  class,  are  not  themselves  capitalists,  as  a  class,  that 
they  do  not  own  and  control  their  own  means  of  produc- 
tion and  exchange  and  pay  themselves  their  own  wages,  this 
fact  "  introduces  complexity "  into  the  solution  of  the 
problem  of  modern  production;  in  which  all  the  means 
and  instruments  of  production  are  in  the  hands  of  the 
capitalists  and  the  workers  have  only  their  labour-power 
to  sell.  If  I  had  tried  to  invent  nonsense  in  order  to  have 
the  pleasure  of  fathering  it  upon  the  late  Professor,  I  am 
confident  that  I  could  not  have  hit  upon  anything  so  in- 
describably silly  as  this.  Yet  this  is  the  genius  before 
whose  shrine  our  University  Professors  of  Political  Econ- 
omy still  prostrate  themselves ! 

If,  however.  Professor  Jevons  showed  himself  incon- 
sistent, incapable,  and  confused  in  his  theories  of  value  in 
exchange,  labour,  and  capital,  he  was  equally  at  a  loss 
when  he  came  to  the  discussion  of  practical  questions.     His 


FINAL  FUTILITY  OF  FINAL  UTILITY      275 

foolish  utterances  on  the  exhaustion  of  our  coal  supply 
have  long  since  been  forgotten.  His  speculations  on  the 
depreciation  of  gold  have  been  absurdly  falsified.  His 
analysis  of  the  problems  connected  with  money  has  not 
advanced  us  a  single  step.  His  remarks  about  gluts  and 
commercial  crises  are  ridiculously  weak. 

This  last,  I  know,  is  a  very  tender  place  with  economists 
of  Professor  Jevons'  school.  For  what  has  "  the  master  " 
said?  "Overproduction  is  not  possible  in  all  branches  of 
industry  at  once,  but  it  is  possible  in  some  as  compared 
with  others."  Now,  as  a  matter  of  fact,  the  history  of  the 
commercial  crises  of  the  last  century,  if  it  throws  into 
relief  one  point  more  clearly  than  another,  proves  that  over- 
production, or  glut,  in  all  branches  of  industry  at  once  — 
a  complete  industrial  crisis  owing  to  social  causes  in  every 
department  of  industry  —  is  not  only  possible  but  inev- 
itable. 

How  to  explain  these  recurring  crises?  Jevons  was 
quite  incapable  of  doing  it.  His  "  fiual  utility  "  gave  him 
no  clue,  and  his  followers,  save  in  cases  where  they  convey 
without  acknowledgment  from  others,  are  as  much  at  sea  as 
he  was  himself.  But  —  not  to  be  beaten  at  once,  he  went 
off  out  of  our  social  arrangements  —  the  very  idea  of  the 
antagonisms  between  social  production  and  individual 
exchange,  between  commodities  and  money,  between  pro- 
duction for  use  and  production  for  profit,  never  entered  his 
mind  —  he  went  off,  I  say,  out  of  our  social  arrangements, 
and  even  out  of  our  planet,  right  away  to  the  sun,  the 
source,  he  thought,  of  economic  as  of  other  light.  It  was 
the  spots  on  the  sun  that  did  all  the  mischief !  Unluckily 
for  this  hypothesis  —  but  really  it  is  not  necessary  to  deal 
further  with  that  ridiculous  aberration.  His  own  followers 
are  ashamed  of  the  nonsense,  and  I  only  refer  to  it  now  as 


276  THE  ECONOMICS  OF  SOCIALISM 

further  evidence  of  the  utter  futility  of  his  own  system. 
Fortunately,  the  entire  theory  of  commercial  crises  has 
been  worked  out  by  a  very  different  school  of  thinkers,  and 
Jevons'  "  Commercial  Crises  and  Sun  Spots  "  may  be  left 
to  gather  dust  on  its  neglected  shelf,  until  some  writer, 
with  nothing  better  to  do,  thinks  it  worth  while  to  publish 
a  monograph  on  "  The  Strange  Hallucinations  of  Professors 
of  Political  Economy." 

Professor  Alfred  Marshall  has  likewise  his  pretty  little 
excursion  into  the  realms  of  fancy  in  that  huge  tome  of  his 
that  elucidates  not  a  single  problem  which  he  takes  upon 
himself  to  solve.  Professor  Marshall's  hallucination  as- 
sumes the  shape  of  "  Consumers'  Rent." 

This  learned  gentleman  from  Oxford  teaches  the  young 
gentlemen  at  Cambridge  that  if  they  would  rather  pay  £1 
for  a  halfpenny  box  of  matches  than  go  without  lucifers 
they  pocket  a  Consumers'  Pent  to  the  tune  of  19s.  lli/2<i! 
This  fallacy  arises  directly  out  of  the  notion  that  "final 
utility "  or  "  esteem "  constitutes  the  measure  of  value. 
When,  however,  the  consumers,  whether  they  be  happy 
young  undergraduates  at  Trinity,  or  luckless  dockers  at  the 
East-end  of  London,  grope  in  their  breeches'  pocket  for  the 
19s.  lli/2d.,  which  is  their  just  rent  for  having  been  able 
to  buy  matches  so  much  below  their  "  final  utility,"  they 
will  appreciate  the  humour  of  the  learned  professor  at  its 
true  exchange  value. 

"  But  for  the  honour  of  the  thing  now,"  said  an  Irish- 
man (whom  I  take  to  have  been  a  lineal  ancestor  of  Mr. 
George  Bernard  Shaw)  when  he  was  conveyed  to  a  ball  in 
a  sedan-chair  with  no  bottom  to  it  — "  but  for  the  honour 
of  the  thing  now,  bedad,  I  might  just  as  well  have  been 
walking ! " 

What  now  are  the  tests  of  really  scientific  method  in 


FINAL  FUTILITY  OF  FINAL  UTILITY      277 

Economics,  as  in  every  other  department  of  human  knowl- 
edge? Rigid  and  logical  analysis,  accurate  induction, 
luminous  and  pregnant  hypothesis,  masterly  synthetic  veri- 
fication, preparation  of  the  ground  for  reasonable  forecast. 
On  every  one  of  these  points  Professor  Jevons  is 
markedly  deficient.  His  analysis  is  absolutely  worthless; 
his  induction  is  loose  and  useless;  his  working  hypothesis 
is  "  conspicuous  by  its  absence  " ;  having  nothing  to  verify, 
his  verification  is  unattempted;  while  forecast  on  his  lines 
is  utterly  hopeless.  The  school  of  economists  which  has 
followed  closely  in  his  footsteps  has  been  as  barren  of  im- 
provement or  discovery  as  he  was  himself.  Only  when 
they  have  abandoned  his  crude  and  ill-digested  common- 
places in  favour  of  a  widely  different  method,  have  his 
pupils  done  any  good  work  whatever.  The  Final  Futility, 
of  Final  Utility  is  conclusively  proved  by  the  utter  incapac- 
ity of  any  thorough-going  Jevonian  to  give  a  reasoning 
explanation  of  the  daily  working  of  the  capitalist  system 
of  production  and  exchange.  Surely  it  is  high  time  that, 
at  whatever  expense  to  individual  reputations,  this  involved 
and  bootless  theory  should  be  generally  recognised  as  the 
jumble  of  confusion  which  it  is. 


CHAPTER  XII 

SYNTHESIS  OP  ANALYSIS 

Such  an  analysis  as  that  which  it  has  been  my  endeavour 
to  put  in  a  compendious  shape  in  the  foregoing  pages  neces- 
sarily leads  those  who  adopt  it  as  a  correct  exposition  of  the 
main  features  of  modem  industrial  society  to  consider  the 
steps  which  can  be  consciously  and  advantageously  taken 
towards  the  organisation  of  national  and  international  pro- 
duction and  distribution  on  a  co-operative  instead  of  on  a 
competitive  basis. 

Manifestly,  the  many  antagonisms  of  our  existing  social 
system,  arising  out  of  the  initial  antagonism  between  social 
production  and  individual  ownership  and  exchange,  cannot 
be  harmonised,  so  long  as  there  is  a  wage-paying  class  and 
a  wage-receiving  class.  All,  therefore,  who  wish  to  solve 
the  difficulties  which  at  present  face  us  must  recognise  that 
a  complete  economic  and  social  revolution  can  alone  give 
the  desired  result. 

This  economic  and  social  revolution  is  even  now  being 
prepared  by  the  inherent  weakness  of  the  capitalist  system, 
which  has  already  seen  its  best  days.  The  capitalist  class 
itself  has  conclusively  shown  that  it  is  unable  to  handle 
the  great  means  and  instruments  of  production  and  distri- 
bution to  the  general  advantage  of  the  community.  Periods 
of  wild  inflation  and  ruinous  depression  ;  overcrowded  towns 
and  deserted  country;  luxury  above  and  starvation  below; 
physical  improvement  of  the  well-to-do  class  accompanied 
by  continuous  deterioration  and  enfeeblement  of  a  large 

278 


SYNTHESIS  OF  ANALYSIS  279 

portion  of  the  working-class ;  monopoly  extending,  yet  the 
powers  of  the  State  used  against  the  people  —  such  are  a 
few  of  the  more  obvious  shortcomings  of  fully-developed 
capitalism  which  are  preparing  its  downfall  in  every 
country. 

How  to  anticipate  this  downfall,  and  to  ward  off  if  pos- 
sible the  danger  of  an  intermediate  period  of  anarchy, 
should  be  the  thought  and  work  of  economists  and  states- 
men in  every  country.  No  doubt,  in  view  of  the  deplorable 
social  conditions  of  our  time,  it  is  a  matter  of  little  concern 
to  the  scientific  sociologist  whether  the  inevitable  change 
takes  place  peacefully  or  tempestuously. 

We  ourselves  take  no  account  to-day  of  the  horrors  of 
the  barbarian  invasion  of  the  Roman  Empire ;  of  the  whole- 
sale slaughterings  of  conquering  Mohammedanism  in  East 
and  West;  of  the  turmoil  and  ruffianism  of  the  Middle 
Ages ;  or  of  the  piracy  and  slaving  by  white  men  in  North 
and  South  America  and  Asia  which  fitly  ushered  in  the 
capitalist  epoch.  So  it  will  be  with  those  who  come  after 
us.  The  dwellers  under  international  organised  commun- 
ism will  assuredly  not  trouble  themselves  to  count  the 
numbers  of  those  who  fell  in  the  preceding  conflicts,  or  to 
discriminate  between  the  people  who  died  from  actual  vio- 
lence and  those  who  simply  rotted  out  of  existence  in  the 
bloody  peace  of  our  present  class  war. 

But  such  a  conscious  advance  as  Socialists  advocate,  even 
though  it  may  not  relieve  society  from  the  physical  strug- 
gles which  have  accompanied  or  preceded  other  epochs  of 
crucial  change,  will  at  least  tend  to  shorten  the  period  of 
disturbance  and  to  lay  the  foundations  for  a  solid  recon- 
struction. 

That  capital  must  be  destroyed  before  any  thorough 
reorganisation  can  take  place  is  certain.     This  does  not 


280  THE  ECONOMICS  OF  SOCIALISM 

mean,  however,  that  the  great  means  and  instruments  of 
making  and  distributing  wealth  should  be  destroyed.  Not 
at  all.  Capital  expresses  class-ownership  and  production 
for  profit  as  the  dominant  economic  and  social  system. 
Its  destruction  only  involves  the  change  from  indi\ddual 
or  company  ownership  to  the  ownership  of  the  Community 
at  large.  Wagedom  being  finally  done  away  with  by  the 
abolition  of  capital,  industrial  Communism  will  at  once 
take  its  place. 

Now  the  only  way  in  which  this  can  be  peacefully 
brought  about,  assuming  that  no  cataclysm  occurs,  is 
through  the  agency  of  the  democratic  Community  as  the 
organised  power  of  the  whole  people.  Each  department 
of  industry  or  distribution  which  becomes  a  Public  Service 
is  already  approaching  to  the  Socialist  form.  To  the  form, 
I  say,  because,  as  in  the  case  of  the  Post  Office  in  all 
countries,  the  spirit  of  Socialism  is  wholly  absent.  Instead 
of  co-operative  organisation  for  the  general  advantage,  we 
have  to-day  remuneration  on  the  competitive  scale  and 
overwork,  in  the  lower  grades  of  the  department,  for  the 
benefit  of  the  dominant  class. 

This  arises,  not  from  the  nature  of  the  case,  but  from  the 
determination  of  that  dominant  class  not  to  give  up  its 
position  and  privileges,  and  from  the  ignorance  and  apathy 
of  the  wage-earners,  as  well  without  as  within  the  ranks  of 
the  department.  There  is  no  economic  reason  why  this 
great  public  service  in  particular,  with  its  wide  national 
connections  and  international  ramifications,  should  not 
form  the  nucleus  of  a  great  co-operative  system.  All  its 
members  and  their  families  need  food,  clothing,  and  house- 
room,  all  render  useful  service  in  return  for  these  and  other 
necessaries  of  life;  and  the  genuine  co-operative  methods 


SYNTHESIS  OF  ANALYSIS  281 

of  supply  once  set  on  foot  in  any  of  the  public  services 
would  speedily  spread  to  others. 

During  the  war  department  after  department  of  industry 
and  distribution  was  brought  under  collective  control  and 
administration.  But  for  the  efforts  of  the  Government  to 
"  keep  the  existing  system  in  being "  by  upholding  the 
monopoly  banks,  at  one  end  of  the  scale,  and  the  wasteful 
small  distributors  at  the  other,  peaceful  reconstruction,  in 
the  interest  of  the  whole  community,  on  co-operative  lines, 
would  have  been  carried  much  farther.  Even  as  it  was 
the  war  could  not  have  been  won  on  the  old  capitalist 
lines. 

In  order  to  help  in  the  beneficial  national  advance  the 
great  Co-operative  Societies  who  supply  between  one-fourth 
and  one-third  of  the  population  twice  offered  to  place  their 
entire  organisation  at  the  disposal  of  the  Government.  A 
similar  proposal  was  made  during  the  miners'  strike.  All 
these  suggestions  were  declined.  It  is  clear  nevertheless 
that  along  these  lines,  in  conjunction  with  the  organised 
forces  of  labour  the  most  effective  and  beneficial  co-ordina- 
tion of  existing  competitive  anarchy  can  be  brought  about. 
Unfortunately,  since  the  Armistice  and  the  Peace,  the 
dominant  class  has  done  its  utmost  to  return  to  the  old 
chaotic  profiteering  system  and  has  succeeded  so  far  in 
subordinating  the  management  of  the  community  to  the 
control  of  the  Trusts,  now  more  powerful  than  ever.  This 
policy,  though  temporarily  successful,  must  ere  long  lead 
to  the  absorption  of  monopolies  by  the  Co-operative  Com- 
monwealth. 

Wherever,  in  fact,  the  company  form  on  a  large  scale 
has  been  attained,  either  in  production  or  distribution, 
there  the  economic  development  has  already  reached  the 


282  THE  ECOXOMICS  OF  SOCIALISM 

point  at  which  the  State  can  easily  step  in  and  advan- 
tageously substitute  a  public  service  for  a  shareholders' 
organisation  or  monopoly.  And  those  great  enterprises 
which,  from  their  inception,  have  been  in  the  form  of  a 
joint-stock  company  are  obviously  those  which  lend  them- 
selves most  naturally  to  this  change. 

Railways  and  canals,  for  example,  being  the  main 
arteries  of  transport  and  communication  in  every  civilised 
country,  would  be  far  better  in  the  possession  of  the  public 
at  large,  as  are  the  highways  and  bridges  which  it  has  been 
the  policy  everj'where  of  late  years  to  free  from  turnpikes 
and  toll-bars.  Such  functions  as  those  now  fulfilled  by 
railways  can  never  be  safely  left  in  private  hands. 

This  is  being  recognised  both  in  England  and  America, 
where  railway  companies  have  been  allowed  more  latitude 
than  anywhere  else.  The  virtual  monopoly  of  transport 
which  they  possess  is  so  manifestly  a  government  within  a 
government,  and  so  opposed  to  the  public  interest,  that  the 
demand  for  nationalisation  and  socialisation,  that  is,  for 
their  conversion  into  a  co-operative  public  service,  is  daily 
growing  on  both  sides  of  the  Atlantic,  and  finds  acceptance 
among  members  of  the  capitalist  class  itself. 

Assuming  such  nationalisation  and  socialisation  to  be 
carried  out  to  the  fullest  extent,  it  by  no  means  follows,  of 
course,  that,  except  in  form,  we  should  be  any  nearer  to 
the  institution  of  Social-Democracy,  seeing  that  in  coun- 
tries where  the  railways  are  already  national  property 
capitalism  reigns  supreme.  But  the  machinery  for  co- 
operation is  so  far  made  ready  for  immediate  use,  and  the 
area  of  possible  peaceful  transition  is  so  greatly  widened, 
that  the  abolition  of  wages  and  the  co-operative  apportion- 
ment of  wealth  could  be  easily  set  on  foot. 

Similarly  with  coal  and  oil  mines.     Coal  is  a  necessary 


SYNTHESIS  OF  ANALYSIS  283 

of  modem  industrial  life,  and,  as  in  the  case  of  the  rail- 
ways, many  of  the  dominant  class  who  regard  Social- 
Democracy  with  horror  have  been  frightened  by  coal 
strikes,  and  the  consequent  stoppage  of  trade,  into 
advocacy  of  the  collective  acquisition  aL'l  management  of 
coal  mines  in  the  interest  of  the  whole  community.  The 
same  reasoning  applies  with  almost  equal  force  to  the  great 
monopoly  of  mineral  oil.  The  production  and  distribution 
of  both  is  controlled  by  companies,  and  there  is  assuredly 
no  economic  difficulty  to  be  overcome  in  their  appropriation 
by  tbe  people  at  large. 

Here  again  the  area  of  possible  co-operative  production 
and  distribution  would  again  be  greatly  extended,  as  these 
branches  of  industry  became  public  services  instead  of 
company  monopolies. 

The  conversion  of  the  factory  industry  in  its  various 
departments  of  cotton,  wool,  iron,  leather,  liquors,  etc., 
presents  greater  difficulty.  But  here,  likewise,  there  is  now 
no  longer  any  economic  obstacle  to  be  overcome.  On  the 
contrary,  the  economic  forms  are  manifestly  ready  —  and 
this  applies  in  an  equal  degree  to  the  great  distributing 
stores  owned  by  limited  companies  —  for  the  transforma- 
tion from  competition  and  production  and  distribution  for 
profit,  to  co-operatiou  and  production  and  distribution  for 
use.  Eaw  materials  and  goods  of  all  kinds  would  then  be 
produced  and  warehoused  in  publicly  owned  and  communal 
stores  for  the  service  of  all  who  formed  part  of  the  co- 
operative commonwealth.  The  moment,  in  short,  men's 
minds  become  capable  of  understanding  the  real  problem 
to  be  solved  around  them  that  problem  is  virtually  on  the 
high  road  to  solution  in  so  far  as  all  these  large  organisa- 
tions are  concerned. 

A  more  serious  question  is  presented  by  the  land;  and 


284  THE  ECONOMICS  OF  SOCIALISM 

the  reorganisation  of  the  great  fundamental  industry  of 
agriculture  on  a  co-operative  basis  is  the  most  difficult 
problem  of  all.  In  no  country  has  agriculture  attained 
the  company  form  except  in  a  few  isolated  instances.  In 
no  nation  except  in  England  have  the  peasants  been  com- 
pletely uprooted  from  the  soil;  though  the  tendency  for 
population  everywhere  is  to  migrate  from  the  rural  dis- 
tricts to  the  large  towns.  Each  nation  must  inevitably 
settle  this  as  other  matters  in  accordance  with  its  historic 
growth  and  the  stage  of  its  economic  development. 

Where  the  population  is  still  attached  to  the  soil,  as  in 
France,  Germany,  Italy,  and  generally  on  the  Continent  of 
Europe,  or  where  it  has  lately  settled  in  the  country  dis- 
tricts, as  in  the  United  States  and  the  Colonies,  it  is 
manifest  that  the  difficulties  to  be  met  are  quite  different 
from  those  which  have  to  be  faced  and  dealt  with  in  Eng- 
land. Yet  in  both  cases  the  establishment  of  farming  and 
market-gardening,  as  an  industry  to  be  worked  with  the 
best  possible  machinery'  and  scientific  appliances  in  co- 
operative union  and  alternation  with  other  industries,  is 
obviously  the  end  to  be  aimed  at.  Nor  are  the  obstacles 
so  great  as  might  at  first  sight  appear.  Though  there  can 
be  no  immediate  progression  from  the  company  to  the 
public  service  as  in  other  cases,  the  moment  co-operation 
and  communism  begin  to  replace  competition  and  wage- 
slavery  the  tendency  of  agriculture  will  be  towards  the 
same  organisation  as  obtains  in  the  other  departments  of 
social  work. 

It  is  the  necessity  for  treating  all  the  agencies  of  pro- 
duction and  distribution  as  portions  of  the  next  great 
national  development  which  constitutes  mere  muuicipalisa- 
tion  a  danger  in  the  near  future.  To  put  gas,  water, 
tramways,  and  so  on  under  the  control  of  the  municipali- 


SYNTHESIS  OP  ANALYSTS  285 

ties  may  mean  better  and  cheaper  administration  under 
capitalist  conditions.  But  the  tendency  of  those  who  fix 
upon  municipalities  as  the  limit  is  to  crystallise  the  towns 
as  they  are. 

Instead  of  doing  this,  the  first  object  of  Socialism  must 
of  necessity  be  to  break  down  the  barriers  between  country 
and  town  and  spread  the  population  out  into  the  rural 
districts;  not  for  the  purpose  of  remaining  isolated  and 
immovably  planted  on  the  soil,  but  as  a  portion  of  the 
active  life  of  the  whole  community  according  to  the  seasons ; 
the  town  forming  the  centres  of  manufacture  and  handi- 
craft and  the  gathering-places  for  the  higher  instruction 
and  amusement.  That  the  greater  part  of  our  modem 
cities  will  have  to  be  completely  destroyed  is  at  any  rate 
clear  to  all  who  bear  in  mind  tliat  fresh  air  is  a  necessity 
for  healthy  existence. 

Such  reorganisation  on  progressive  Social-Democratic, 
Co-operative  lines  may  but  too  probably  be  interrupted  by 
the  economic  and  social  collapse  and  cataclysm  which  some 
of  us  fear  will  overtake  the  peoples  uninstructed  as  to  its 
real  meaning,  and  unprepared  to  deal  capably  with  its 
results.  In  any  case,  however,  tlie  wbole  civilised  world 
will  inevitably  be  forced,  sooner  or  later,  to  act  together  in 
the  reconstitution  of  the  future.  The  class  war  knows  no 
national  boundaries,  the  markets  of  our  day  are  the  markets 
of  the  world.  As  mankind  has  advanced  in  its  economic 
and  social  progression  from  tlie  gens  and  the  tribe  to  the 
province,  the  municipality,  the  nation,  so  the  change  from 
the  social  production  of  commodities  by  wage-slaves,  and 
the  exchange  for  profit  under  the  control  of  individuals, 
have  broken  down  the  boundaries  of  nationality,  and  the 
next  stage  will  be  international  social  production  and  social 
exchange  of  articles  of  use  without  profit.     Economics,  in 


286  THE  ECONOMICS  OF  SOCIALISM 

the  main,  though  by  no  means  wholly,  guide  the  course  of 
human  development,  and  the  most  careful  economic 
analysis  of  our  present  society  shows  us  that,  partly  con- 
sciously and  partly  unconsciously,  the  greatest  transforma- 
tion of  the  ages  has  already  begun. 

That  transformation  must  inevitably  entail  the  complete 
overthrow  of  capitalist  production  of  commodities  for 
profit,  and,  therefore,  the  payment  of  wages  for  the  pur- 
chase of  labour-power.  Then  production  for  use  by  the 
social  services  of  the  whole  adult  community,  having  com- 
mand over  nature  and  the  social  creation  of  wealth,  by 
processes  infinitely  greater  than  any  ever  before  at  the 
disposal  of  mankind,  will  substitute  the  freedom  of  organ- 
ised co-operation  for  the  slavery  of  competitive  anarchy. 


UNIVERSITY  OF  CALIFORNIA  AT  LOS  ANGELES 

THE  UNIVERSITY  LIBRARY 

This  book  is  DUE  on  the  last  date  stamped  below 


M>R  3  0 1952 


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atC'O  LD-UR'. 

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a.    \C. 


Form  L-9-15m-2,'36 


75 


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